Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

TEESSIDE RAILLESS TRACTION BOARD (ADDITIONAL ROUTE) PROVISIONAL ORDER BILL

Read the Third time and passed.

BRITISH TRANSPORT COMMISSION ORDER CONFIRMATION

Bill to confirm a Provisional Order under the Private Legislation Procedure (Scotland) Act, 1936, relating to the British Transport Commission, presented by Mr. John Maclay; and ordered (under Section 7 of the Act) to be considered upon Wednesday next and to be printed. [Bill 131.]

MONTROSE BURGH AND HARBOUR (AMENDMENT) ORDER CONFIRMATION

Bill to confirm a Provisional Order under the Private Legislation Procedure (Scotland) Act, 1936, relating to Montrose Burgh and Harbour, presented by Mr. John Maclay; and ordered (under Section 7 of the Act) to be considered upon Wednesday next and to be printed. [Bill 132.]

Oral Answers to Questions — TRADE AND COMMERCE

European Common Market

Mr. Holt: asked the President of the Board of Trade if he has yet considered the desirability of publishing a White Paper on the advantages and disadvantages of Great Britain joining the European Common Market, in relation to those matters for which he is responsible; and if he will make a statement.

The President of the Board of Trade (Mr. Reginald Maudling): I do not think that this would be a suitable subject for a White Paper.

Mr. Holt: Will the President of the Board of Trade tell me whether his Department has carried out exhaustive studies of the advantages and disadvantages? If so, does not he think it necessary, in view of the general discussion going on, that the largest number of facts about the situation should be put before Parliament and the country, and does he not agree that a White Paper would be a suitable instrument to do that?

Mr. Maudling: I agree about the need for the maximum information, but I do not think this would be the best procedure. We have made a close study of the consequences of the Treaty of Rome as it stands, but the discussion is often not about that but about the signing of a different document. I think that it would be wrong to take out from the general problem the specific trade questions which are only part of the comprehensive picture.

Mr. Clark Hutchison: Has my right hon. Friend read about the present dispute over agriculture in the Common Market countries, particularly the difficulties raised by the French, and does not he think that we should be better engaged in expanding our Commonwealth trade, and not become too closely hooked up with the squabbling peoples of Europe?

Mr. Maudling: I have never believed that there was any conflict between extending our Commonwealth trade and extending our European trade.

Resale Price Maintenance

Mr. F. Noel-Baker: asked the President of the Board of Trade whether he has yet completed his inquiry into retail price maintenance; and what decision he has reached as a result of his consideration of the views of retailers and manufacturers on this matter.

Mr. Maudling: Though the inquiry into resale price maintenance is well advanced, it is not yet complete, and I cannot say when I shall be in a position to make a statement.

Mr. Noel-Baker: Would not the right hon. Gentleman agree that this is a matter of some urgency and that consumers and consumer organisations and many enlightened traders are getting very restive? Is he not aware that there are all kinds of ingenious and legitimate loopholes, one of which was publicised today, getting round this arrangement, and is not it very important that we should reach a decision quickly?

Mr. Maudling: Yes, Sir, I agree. I think that we should reach a decision quickly, but I have been more and more impressed by the complexity of this argument, and I wish to get all possible information before reaching a decision.

Motor Vehicles (Guarantees)

The following Question stood upon the Order Paper:

Mr. F. NOEL-BAKER: To ask the President of the Board of Trade whether he will institute proceedings under the Merchandise Marks Act against those motor manufacturers who advertise that their vehicles carry a 12-month guarantee although many parts, including coach work, tyres, speedometer, and electrical equipment, are manufactured by other firms.

Mr. F. Noel-Baker: Before asking this Question, may I apologise for the fact that the last few words of my original Question were omitted? I have put them privately to the right hon. Gentleman, and I hope that he will answer the Question as I intended to ask it.

Mr. Maudling: I am advised that there is no basis for proceeding under the Merchandise Marks Acts, 1887–1953. So far as I know, the fact that some

accessory parts of a car are specifically excluded from a car maker's formal guarantee does not give rise to any unusual difficulty in practice.

Mr. Noel-Baker: Is the President aware that a number of consumer organisations are very concerned about this, and that the impression given to a prospective buyer is very misleading? Will he have another look at it?

Mr. Maudling: I did not think there was much concern about this, but if the hon. Member has evidence which he would care to send to me, I shall be happy to study it.

Pontardawe

Mr. I. Davies: asked the President of the Board of Trade what success he has had in bringing new industry to the Pontardawe development district since the introduction of the Local Employment Act.

Mr. Maudling: In the Ystalyfera-Pontardawe area itself, there are about 250 new jobs in prospect. Pontardawe should also benefit substantially from the 3,000 new jobs expected to arise in the Swansea area in the near future.

Mr. I. Davies: Is the right hon. Gentleman aware that the position in this area and the unemployment which has persisted there has been changed because large numbers of people travel long distances from the district to their employment? The threatened closure of the one remaining steelworks there as the result of the opening of Llanwern steelworks, which is reported to be opening next year, is very serious. Will the right hon. Gentleman redouble the efforts of his Department—which are appreciated—to bring new industries to cope with inevitable redundancy? Will he consider the establishment of an advance factory for this area?

Mr. Maudling: I am grateful for what the hon. Member said about the efforts we have made. I recognise that there is a great deal of travel to work involved. As to the steelworks, I understand that they will have to close down in a few years, but I do not expect any serious difficulty in placing the men involved in view of the extension of the numbers of men in employment in South Wales.

Commonwealth and Sterling Area

Mr. Biggs-Davison: asked the President of the Board of Trade, having regard to his efforts to expand British exports in Europe, east and west of the Iron Curtain, what proposals he has to increase trade within the Commonwealth and sterling area.

Mr. Maudling: My efforts to promote the expansion of United Kingdom exports have been directed to the markets of the Commonwealth and the sterling area, as well as to Europe and other parts of the world.

Mr. Biggs-Davison: Would my right hon. Friend agree that the economic strength and unity of the Commonwealth are the best foundation for a satisfactory economic arrangement in Europe? Will Her Majesty's Government do their best to try to set up an appropriate form of Commonwealth freer trade association?

Mr. Maudling: I certainly agree that the economic strength of the Commonwealth, with which the political cohesion of the Commonwealth is linked, is of the greatest possible importance to this country and, I think, to the whole free world as well.

Factory Sites, Shildon

Mr. Boyden: asked the President of the Board of Trade how many industrialists have been shown factory sites within the area of the Shildon Urban District Council since the passing of the Local Employment Act.

Mr. Maudling: None, Sir.

Mr. Boyden: Is the President of the Board of Trade aware of the co-operative attitude of Durham County Council towards industrialists? Is he satisfied that the present issue of industrial development certificates and the uncontrolled building of offices in London are not contributing to the lack of industry coming to this area? Will he have another look at this question of office building?

Mr. Maudling: I think that is rather a different question. In the Shildon urban district I am told that there is only one factory site of 12 acres available, and we have found that industrialists coming to the south-west Dunham area generally

are satisfied with the other sites in the same district.

Mr. Boyden: Is the right hon. Gentleman aware that there is considerable unemployment in the neighbourhood, if not in Shildon itself, and that there are other sites which would help with Shildon?

Mr. Maudling: My point is that we have been asking people to go to other sites but not in the particular district to which this Question refers.

Russian Oil

Mr. Jay: asked the President of the Board of Trade bow many applications he has had from iron and steel companies for licences to import Russian oil at prices below the United Kingdom market price.

Mr. Maudling: None, Sir.

Mr. Jay: As the Steel Company of Wales uses as much oil as coal, is it not rather odd that it should not have put in any application to import cheaper Russian oil? Can the President of the Board of Trade say whether his attitude to any such application would be the same as it would be to an application to import cheap American coal?

Mr. Maudling: I do not think I am called upon to answer questions about applications which have not yet been made to me.

Mr. Jay: Can the right hon. Gentleman explain why they have not been made?

Mr. Maudling: That is a question which had better be addressed to the applicants.

Mr. Thorpe: asked the President of the Board of Trade at what price and in what quantities the Russian Government have offered to sell oil to the United Kingdom; and whether he will make a statement outlining his reasons for rejecting this offer.

Mr. Maudling: During my recent visit to Moscow the Soviet authorities asked for a quota of 2 million tons which would subsequently rise over a period. They did not quote any prices. I explained the reasons why, as a producer and exporter of oil ourselves through the United Kingdom oil companies, we would not, in present circumstances, agree to license additional


imports of Soviet oil. Our own oil companies have a substantial surplus of oil available for export and at the moment we are looking for new outlets, not new sources of supply.

Mr. Thorpe: Did not the right hon. Gentleman ask what the price was? Did he not find out what it was? Has he no idea at all? He apparently has not. Is it not a fact that the price would have been lower than that on the market at the moment? Would not this have been a very good way of breaking through price rings and getting cheaper oil for the consumer? If the President of the Board of Trade is anxious to stimulate trade, what other things does he intend to purchase from Russia, if he refuses to take oil in return for our goods?

Mr. Maudling: I cannot understand why people seem to think that oil is the only thing Russia produces. There is an immense range of raw materials, machinery and consumer goods, all of which I hope the Russians will sell in increasing quantities in this country. But I do not see the sense in buying additional quantities of something which we already have in surplus.

Mr. Jay: Do the reasons the right hon. Gentleman gave for not importing Russian oil also apply to the import of American coal?

Mr. Maudling: The Question relates solely to oil.

Mr. Thorpe: Will the right hon. Gentleman answer my supplementary question? Did he in fact try to find out what the price was?

Mr. Maudling: Having said that we did not want to buy the oil, there was no point in finding out the price.

Mr. Dugdale: Do we not spend any dollars at all on buying oil?

Mr. Maudling: Yes. A certain amount of dollar oil comes into the country, but the oil which comes into the country through the British oil companies costs us only a small proportion of its total price in foreign exchange, whereas Russian oil would cost us 100 per cent. in foreign exchange. It is a sheer balance of payments calculation, on which the conclusion is quite clear.

Mr. C. Osborne: Is it not quite clear that the National Union of Mineworkers

is as bitterly opposed to American coal as it is to Russian oil?

Mr. Holt: What does the right hon. Gentleman think the point of international trade is if it is not to endeavour to buy an article in one place which is cheaper rather than to buy more expensively in another place?

Mr. Maudling: The point is to buy things we need and to sell things we have in surplus.

Egg Prices, Poland

Mr. Walker: asked the President of the Board of Trade how many days elapsed before he replied to the communication received by him from the National Farmers' Union on 30th March asking him to ascertain the internal price of eggs in Poland.

Mr. Maudling: Fourteen days.

Mr. Walker: Is my right hon. Friend aware that from the time the National Farmers' Union first contacted his Department there was a total of twenty-eight days' delay before a decision was given and that twenty-four of those days of delay took place in his Department? In view of this, could he review the procedures which take place on antidumping legislation?

Mr. Maudling: I think that in this case we acted very quickly. Having just come back from Poland and Russia, I can say that the difficulties of establishing a fair market price for these commodies are very considerable.

Mr. Buck: Is my right hon. Friend aware that I received a letter on 17th May about this matter from the National Farmers' Union which said that
…it would be less than fair to suggest, as far as our own experience is concerned that the Board of Trade have acted otherwise than helpfully and promptly"?
Would he agree, however, that what is needed here is revision of the procedure under the Act, the preliminary procedure having no statutory authority, I understand, at present?

Mr. Maudling: I should be very glad to consider any suggestions on this matter but we must be careful not to act too precipitately, because it might damage our exports if we were to do so.

Commonwealth Imports

Mr. Biggs-Davison: asked the President of the Board of Trade what Commonwealth imports receive, or will receive, less favourable treatment than corresponding European Free Trade Association and Finnish imports in the United Kingdom market as a result of obligations under the Stockholm Convention, and the association between the European Free Trade Area and Finland; and what proposals he has to remove discrimination in European Free Trade Area markets against oversea Commonwealth countries.

Mr. Maudling: The principal goods which will receive less favourable treatment when imported from the Commonwealth than from the European Free Trade Association countries are motor cars, motor cycles, agricultural tractors, musical instruments, clocks and watches, cinematograph film and goods of silk and man-made fibres. The treatment of Commonwealth goods in other E.F.T.A. countries is a matter for those countries and the Commonwealth Governments concerned.

Mr. Biggs-Davison: Will not this become more serious as the industrialisation of the overseas Commonwealth proceeds? While one welcomes the European Free Trade Association and the according of preference to European countries, should not it be governed by the principle of first priority to the Commonwealth?

Mr. Maudling: I think that this problem arises from an historical accident. These are the only products subject to duties when they come to this country from the Commonwealth. In fact they represent well under 1 per cent. of our imports from the Commonwealth and there is little competition between the Commonwealth and E.F.T.A. in these matters, although I admit that the problem may increase in future.

Mr. Jay: What is the purpose of maintaining these duties on Commonwealth goods? Why should we not take duty-free goods from the Commonwealth?

Mr. Maudling: That is a question for the Chancellor of the Exchequer.

North-East

Mr. P. Williams: asked the President of the Board of Trade what further progress has been made under the Local Employment Act in bringing additional employment to the North-East.

Mr. Maudling: Since my hon. Friend the Parliamentary Secretary answered a similar Question from my hon. Friend on 2nd May, a number of firms have shown an active interest in setting up in the North-East. The number of new jobs in prospect in the development districts in this area remains at about 10,000.

Vegetable Packers, Glenrothes (Financial Assistance)

Mr. W. Hamilton: asked the President of the Board of Trade what re consideration is being given by his Department to the application for financial assistance by a firm of vegetable packers in Glenrothes, Fife; and how soon a decision will be reached.

Mr. Maudling: I have reconsidered the case, in the light of the information recently supplied by the applicant. I am satisfied that, as my hon. Friend told the hon. Member on 9th May, the Board has no power to assist this project.

United States Firm, Glenrothes (Expansion)

Mr. W. Hamilton: asked the President of the Board of Trade if he is aware of the desire of a United States firm, details of which have been sent to him, now established in Glenrothes, Fife, to expand; and what assistance his Department is able to provide, under the terms of the Local Employment Act.

Mr. Maudling: I am aware of the desire of this United States company to expand, but, as Glenrothes is not itself a development district and the proposed expansion would not benefit a development district, it is not eligible for assistance under the Local Employment Act.

Mr. Hamilton: Has the right hon. Gentleman made investigations into this case? Is it not a fact that if this expansion were allowed in Glenrothes it would employ people under the terms


of the Glasgow ovrspill agreement? If that is the case, will not the right hon. Gentleman reconsider the position, because it would be a very regrettable development, I am sure he would agree, if the expansion were taken to West Germany.

Mr. Maudling: I have had a very close look at this matter, but it seems that the expansion would not in fact employ people from the Glasgow overspill, but local people. For that reason, I do not think that it falls within the powers I have under the Act.

Mr. Jay: Even though the right hon. Gentleman may not be able to give financial assistance, I presume that in a case like this he would grant an industrial development certificate readily?

Mr. Maudling: I cannot see why I should not do that, but the Question deals with financial assistance as determined by the Act.

Soviet Union (Minister's Visit)

Mr. Emrys Hughes: asked the President of the Board of Trade if he will make a statement on his recent visit to the Union of Soviet Socialist Republics.

Captain Orr: asked the President of the Board of Trade whether he will make a statement on his visit to the British Trade Fair in Moscow, and on the negotiations he had on trade matters with the Soviet authorities.

Mr. Maudling: The British Trade Fair was an outstanding success, and the organisers and exhibitors deserve our warmest congratulations on their achievements. I understand that a number of important contracts were concluded during the course of the Fair and I hope that much other business will result from it.
I reviewed with Soviet Ministers the development of Anglo-Soviet trade as we are required to do under our Trade Agreement of 1959. Both sides put forward a number of proposals for expanding this trade which are to be the subject of further study. In particular I proposed that we should aim at doubling the existing quotas on both sides when in the autumn we negotiate the detailed trade arrangements for 1962.

Mr. Hughes: I hope I shall not embarrass the Minister when I con

gratulate him upon his visit. Will he tell us if he met Mr. Khrushchev and how he got on with him?

Mr. Maudling: I did have the pleasure of meeting Mr. Khrushchev and we seemed to get on quite well, but we were not discussing political subjects.

Captain Orr: As one of the exhibitors, will my right hon Friend accept from me that we very much appreciated the fact that he went there? Could he tell us whether or not in his discussions the Russians put forward the view—which they put to some of us—that there is a tremendous market for British consumer goods if we would take in return some Russian oil? Will he say whether or not he had discussions on oil and whether price was mentioned?

Mr. Maudling: I think a later Question on the Paper covers those points to which, as my hon. Friend knows, publicity has been given.

Mr. Rhodes: Will the right hon. Gentleman say whether he came back with any strong impressions as to Russian productivity in comparison with our own?

Mr. Maudling: I think that it would be very unwise to try to make an estimate of a country of that size. I have not either the experience or the expertise to do so.

Mr. C. Osborne: Will my right hon. Friend remember that on the Saturday morning the Russian Trade Commissioner, in my presence and his presence, said that what they wanted to buy from us was the machinery to produce the consumer goods and not our consumer goods? Since consumer goods contain a greater element of labour, will he see that in the next trade agreement they buy a good proportion of finished consumer goods?

Mr. Maudling: Yes. I have proposed that the quota for consumer goods on both sides should be doubled.

G.A.T.T. (Negotiations)

Mr. Holt: asked the President of the Board of Trade on what groups of tariffs Her Majesty's Government are not offering to make a 20 per cent. cut in the General Agreement on Tariffs and Trade negotiations.

Mr. Maudling: It is not the practice to disclose detailed information of this kind while negotiations are in progress.

Mr. Holt: But the President of the Board of Trade would not deny the statement which has been published in the Press that he has refused to make a cut of 20 per cent. across the whole of our industrial tariffs. Does he not realise that he is missing a great opportunity? He has spoken a lot about cutting tariffs. Does he not further realise that, in view of the widespread conversion now taking place in the Tory Party, including that of such a reactionary as the hon. Member for Chigwell (Mr. Biggs-Davison) whose conversion to freer trade we have heard this afternoon, unless he takes a much better stand at G.A.T.T. than he has taken so far he will go down as a most reactionary President of the Board of Trade?

Mr. Maudling: We cannot disclose these details, and neither the blandishments nor the threats of the hon. Member will cause me to do so.

Mr. Biggs-Davison: Is my right hon. Friend aware that I am in favour of the preferential reduction of tariffs?

Mr. Russell: Will my right hon. Friend make it clear to the Liberal Party that universal free trade is no part of this country's policy?

Mr. Maudling: I do not think that my responsibility extends to making things clear to the Liberal Party.

Mr. Jay: Is it not rather extraordinary that the Liberal Party are prepared to accept the high import duties on foodstuffs which would be involved in accepting the common external tariff of the Common Market?

Mr. C. Osborne: asked the President of the Board of Trade, since the United States Government has power until next summer to reduce tariffs by up to 20 per cent., what approaches he has received from the American Government that the United Kingdom should make equal tariff cuts; which British industries he estimates would be most affected by such cuts; what consultations he has had with them; and if he will make a statement.

Mr. Maudling: These matters are now being discussed at the G.A.T.T. Tariff

Conference at Geneva. While negotiations are in progress, it would not be appropriate to disclose any details of our own offers or of the requests made to us. In preparing for the Conference, the Board of Trade had extensive consultations with British industries.

Mr. Osborne: If the Americans ask us to make equal tariff cuts, will my right hon. Friend bear in mind that the Americans export only 3 per cent. of their gross national product, whereas we export 30 per cent.? The same is almost true of imports. Therefore, any changes will affect this country ten times more than they will affect America. Will he be careful to ensure that we are not taken pari passu for a ride against our own interests?

Mr. Maudling: I always think that there is much wisdom in the remark of a distinguished predecessor of mine, who said that in tariff negotiations our object should be a quid pro quo, and thirty bob if we can get it.

Motor Car Exports

Mr. Chapman: asked the President of the Board of Trade what was the decline in motor car exports, by number and proportion, in the first quarter of 1961 compared with 1960; and to what extent the position has improved in April and May.

Mr. Maudling: Compared with the first quarter of 1960 the number of new cars exported in the first quarter of 1961 declined by 91,311 or about 53 per cent. Figures for May are not yet available but in April exports reached a level of 31,726 cars, an increase of about 12 per cent. over the monthly average for the first quarter of the year.

Mr. Chapman: Is not this nevertheless very alarming? Does it not point to the danger of a very bleak winter for motor car workers once the home summer boom in sales falls off? Would the right hon. Gentleman take up with the industry the complaints made at the week-end by the export director of B.M.C., who said that much greater freedom was needed for the Export Credits Guarantee Department, that better briefing of commercial counsellors was needed about this industry and that a more virile attitude to commerce in some of the


embassies was needed? Does he realise, in other words, that complaints are being made that his Department and the Government generally are not assisting to improve the export of motor cars in the way they should?

Mr. Maudling: I think that without any question these figures underline the importance of exports to employment in the motor car industry. I will certainly examine any criticisms of our services, but it is sometimes a little too easy to blame the commercial officers overseas. I think that by and large they do a very good job.

Fruits and Vegetables

Mr. Darling: asked the President of the Board of Trade (1) what action he proposes to take to ensure that strawberries, raspberries and other soft fruits shall be sold by net weight, or in containers of specified minimum weights, during the 1961 season;
(2) what action he proposes to take to implement the recommendations of the committee on weights and measures legislation with regard to home-grown hard fruits and vegetables, during the 1961 season.

Mr. Maudling: I do not consider that effective action on these fruits and vegetables is practicable under existing legislation. In any case, regulations under that legislation requiring fruits and vegetables to be prepacked only in specified weights could not apply until six months after the regulations had been approved by both Houses of Parliament and thus could not operate during the 1961 season

Mr. Darling: As it is now obvious that the Weights and Measures Bill will not be introduced into this House during the present Session, is it possible for the right hon. Gentleman to look at the regulations again, because some of the fruit which I mentioned might be dealt with later? In any case, is it not very unfortunate that the consumers and the growers of these fruits in this country should suffer for another year from the malpractices which take place in this trade due entirely to the Government's incompetence and dilatoriness with the Weights and Measures Bill?

Mr. Maudling: Without accepting the hon. Member's premise, I would point

out that we have no powers which would enable us to operate for the season now upon us.

Mr. Darling: Is it not a fact that these proposals were made ten years ago? What have the Government been doing during the last ten years?

Film Exports (Common Market Countries)

Mr. Swingler: asked the President of the Board of Trade what has been the value of British film exports to the countries of the Common Market in each of the last ten years; and what effect the Treaty of Rome has had on these exports.

Mr. Maudling: The earnings of British films in the countries of the Common Market are not separately distinguished. Such figures relating to earnings remitted from the O.E.E.C. countries as a group as are available do not suggest that the Treaty of Rome has adversely affected these earnings.

Mr. Swingler: asked the President of the Board of Trade what restrictions are at present imposed on the import of British films by the countries of the Common Market; what quota arrangements they maintain; and how these arrangements compare with the British film quota system.

Mr. Maudling: West Germany applies a system of import licences. The Benelux countries impose no restrictions on the import or showing of British films. France operates a system of distribution licences and levies a special release tax. Italy imposes compulsory loans on dubbed British films. France and Italy both apply screen quotas. No general comparison can usefully be made between these diverse arrangements and the British film quota system.

Mr. Swingler: Arising out of that reply, may I ask the right hon. Gentleman this supplementary question: in the event of the Government deciding to join the Common Market, what effect would this have upon the British quota and levy system which we have developed?

Mr. Maudling: That is a different and rather wider question. If the hon. Member puts it down I will be happy to try to answer it.

Small Arms Ammunition (Export)

Mr. Callaghan: asked the Board of Trade when a licence was issued to send three tons of small arms ammunition aboard the cargo liner "Trevalgan" to Laurenco Marques, Mozambique.

Mr. Maudling: No licence was issued for three tons of small arms ammunition. The vessel's cargo included two consignments of shotgun cartridges weighing in total less than one ton, destined for Southern Rhodesia, and covered by export licences issued in March and April.

Mr. Callaghan: This information has been published in Central Africa and has caused considerable revulsion against the policy of Her Majesty's Government. May I take it that no licences will be issued for the export of arms to Angola or Mozambique?

Mr. Maudling: That is quite a different question. I was dealing with a specific case and I have given the information for which I was asked.

Mr. Callaghan: Am I not entitled to ask the Minister whether he will tell us what is the Government's policy in relation to the export of arms in view of the consternation which is being caused in Africa, where it is alleged, and has been published in the Press, that Her Majesty's Government are issuing licences?

Mr. C. Osborne: Put the Question on the Order Paper.

Mr. Maudling: I am grateful to the hon. Member for the opportunity which he has given me to deny these false stories. If he will put a Question down on the Order Paper about the other point I shall be happy to give him an answer.

Milk Products (Dumping)

Mr. de Freitas: asked the President of the Board of Trade what action he has taken about the complaints of the Milk Marketing Board concerning the dumping of milk products.

Mr. Maudling: The Board of Trade received last night an application from the Milk Marketing Board for action under the Customs Duties (Dumping and

Subsidies) Act, 1957, in respect of certain milk products. This is being considered.

Mr. de Freitas: Is the Minister aware that the last time the Board made such an application, I think in 1958, it took nearly five months for his Department to make up its mind and to reach a decision? Will he try to do better this time and remember that the agricultural producer is as much entitled as the industrial producer to protection against dumping of goods below the cost of production?

Mr. Maudling: Certainly the agricultural producer is entitled to as much protection, and I am certain that he gets just as much protection, as any industrial producer. But we have also the interests of the consumer and the exporter to take into account. The Act provides that we must have regard not only to the degree of dumping but also to the question of material injury and the wider question of the national interest. According to the Statute we must consider all these things.

New Industry, Peterlee

Mr. Shinwell: asked the President of the Board of Trade what action he has taken in the past twelve months to attract new industry into Peterlee and the adjoining district; and what success he has had.

Mr. Maudling: In the last twelve months a number of firms have been shown the industrial sites in the area and the facilities of the Local Employment Act have been available throughout the period. There are about 160 new jobs in prospect in the Horden Employment Exchange area arising from expansions by firms already there.

Mr. Shinwell: Does not that mean that nothing has been done in the last twelve months? Does not the right hon. Gentleman understand that there is no point in having a new town unless it has an industrial connotation? We are getting very much concerned about the position. In view of the fact that he has done nothing in the last twelve months, may I have an assurance that he will try to do something in the next twelve months?

Mr. Maudling: I thought that the Answer showed exactly what we have been doing, which is a good deal. If the right hon. Gentleman wants us to direct firms to go there, he is asking for something for which we have no power, and for which the House would not grant us the power.

Oil Imports

Captain Orr: asked the President of the Board of Trade whether he will publish a table setting out the imports of oil into the United Kingdom last year together with the countries of origin.

UNITED KINGDOM IMPORTS



Year ended 31st December


1959
1960


DIVISION 2—PETROLEUM AND PETROLEUM PRODUCTS—

£
£


From
Aden
…
Value
5,854,256
5,326,790


"
Bahrain, Qatar and Trucial States
…
"
24,938,893
19,023,172


"
Kuwait
…
"
125,089,569
160,097,727


"
India
…
"
768,800
356,605


"
Sarawak
…
"
6,032,972
1,429,360


"
Canada
…
"
601,330
294,623


"
Trinidad
…
"
26,990,646
29,753,503


"
Other Commonwealth countries and Irish Republic
…
"
6,659,635
11,220,775


"
Soviet Union
…
"
1,009,814
1,471,135


"
Western Germany
…
"
1,222,178
1,785,398


"
Netherlands
…
"
25,562,643
32,948,540


"
Belgium
…
"
1,858,846
1,556,433


"
France
…
"
4,662,352
4,712,739


"
Italy
…
"
5,053,664
4,241,408


"
Netherlands Antilles
…
"
25,150,781
22,059,605


"
Saudi Arabia
…
"
5,317,060
9,353,373


"
Iraq
…
"
50,981,740
52,536,816


"
Iran
…
"
49,634,438
41,708,086


"
Indonesia
…
"
575,521
603,694


"
United States of America
…
"
13,944,403
9,008,809


"
Colombia
…
"
10,960,882
6,145,904


"
Venezuela
…
"
67,127,952
62,135,629


"
Peru
…
"
1,523,446
1,815,322


"
Other foreign countries
…
"
4,185,924
2,808,395



Division Total
…
..
465,707,745
482,393,841

Hong Kong Cotton Goods

Mr. Thorpe: asked the President of the Board of Trade what representations have been made by Her Majesty's Government, either to the Hong Kong Government or the Hong Kong cotton trade associations, to renew their voluntary agreement limiting the supply of cotton goods to the United Kingdom when that agreement expires.

Mr. Maudling: The Hong Kong Government are aware that Her Majesty's Government believe that a further inter-industry agreement would

Mr. Maudling: As the Answer contains a table of figures, I will, with permission, circulate it in the OFFICIAL REPORT.

Mr. Langford-Holt: Does my right hon. Friend intend to put it under the heading "oil" or will he break it down into subheads for the various types of oil?

Mr. Maudling: The information will be on oil generally but detailed figures are available in the Trade and Navigation Accounts.

Following is the table:

be in the interest of Hong Kong and Lancashire alike.

Mr. Thorpe: Does not the right hon. Gentleman agree that this was a once-and-for-all agreement intended to help Lancashire to reorganise? Does he further agree that it would be wrong for a purely temporary measure to be turned into a permanent restriction on Commonwealth trade? Is he not at least an Empire free trader?

Mr. Maudling: This is a very complicated matter which is not easy to deal with in Question and Answer. I


repeat that we believe that in the long term it is in the interests of both Hong Kong and Lancashire if this inter-industry agreement can be renewed.

Mr. S. Silverman: Has the right hon. Gentleman considered what the position in Lancashire might be if the advice which he is rendering to Hong Kong that she should renew this agreement in her own interest, as well as in the interests of Lancashire, should not be heeded? Would not this create a new emergency in Lancashire? Are any preparatory investigations being made so that we shall not be left, as we were in past years, with an emergency without any plans for dealing with it?

Mr. Maudling: There has been a very close study of this problem, which I agree is a serious one for Lancashire and, indeed, for Hong Kong. I do not think that it would be wise for me to go beyond what I have already said, namely, that we believe that a renewal or a further inter-industry agreement will be in the interests of everyone concerned.

Mr. J. T. Price: When the right hon. Gentleman discusses this matter further with the Liberal Party will he inform them that Adam Smith has been dead for over 200 years and that the principles he adumbrated in his age and generation do not apply to the modern world? Although many of us are greatly in favour of liberalisation of trade wherever possible, we are not in favour of sacrificing the interests of our own people to the sort of propaganda which the Liberal Party is putting out.

Jute Goods

Mr. G. M. Thomson: asked the President of the Board of Trade if he will give an assurance that no changes are pending in the mark-up on imported jute goods by jute control, in view of the present high level of unemployment in the City of Dundee.

Mr. Maudling: Yes, Sir. I can give the hon. Member an assurance that no changes are pending at present.

Mr. Thomson: I thank the President of the Board of Trade very much for that reply.

Developing Countries (Cheap Manufactures)

Mr. C. Osborne: asked the President of the Board of Trade what estimate he has made of the effect on British industry of President Kennedy's suggestion of a joint Western effort to increase imports of cheap manufactures produced by cheap labour from developing countries; which trades would be most affected; how many they employ, respectively; what would be the effect of such a policy upon unemployment in these industries; and if he will make a statement.

Mr. Maudling: I presume that my hon. Friend is referring to a suggestion for an international conference of the principal textile exporting and importing countries. The objectives of this conference are still a matter for discussion internationally. We all recognise the importance of trade for the developing countries, and we also have to bear in mind the interests of our own producing and exporting industries.

Mr. Osborne: Will my right hon. Friend bear in mind that, whilst it is reasonable to protect our own interests, the developing countries cannot raise the very low standard of living of their own people if we prohibit them from selling what they produce? That should be borne in mind when we enter into these negotiations.

Mr. Maudling: This is one of the most difficult problems of the modern world—the comparative interests of the developing countries, which want to trade, and the interests of our own industries threatened with disruptive competition. It is an exceedingly difficult problem which I hope we shall be able to disentangle, but time will be needed to accomplish this.

New Industries, Penryn

Mr. Hayman: asked the President of the Board of Trade how many applications he has had for Board of Trade Advisory Committee aid for new industries for Penryn, Cornwall; and what were the results.

Mr. Maudling: Three, in none of which the Board of Trade Advisory Committee has felt able to recommend financial assistance.

Mr. Hayman: Is the right hon. Gentleman aware that the Penryn Borough Council is greatly perturbed at these refusals and feels that the Advisory Committee should give reasons for refusing? Can the right hon. Gentleman arrange for the cases to be reconsidered and do something to restore the confidence of the people of Penryn in this machinery?

Mr. Maudling: The Advisory Committee will certainly consider any cases if it is given any fresh information on which to do so. In the last year unemployment in Penryn has fallen from 5·4 per cent. to 1·7 per cent., which is quite an improvement.

Mr. Hayman: Is the right hon. Gentleman also aware that much of the unemployment in Penryn is a reflection of the prosperity or employment in Falmouth Docks, which can fluctuate violently?

I.C.I. Factory, Camborne

Mr. Hayman: asked the President of the Board of Trade what success has attended the further efforts he has made to persuade Imperial Chemical Industries to divert to its factory at Camborne another of its industries to replace the safety-fuse industry transferred to Scotland.

Mr. Maudling: I understand that the company has no alternative use for the factory but is now, in consultation with my Department, seeking to interest new firms in the property.

Mr. Hayman: Is the President of the Board of Trade aware that many people in Camborne and Redruth feel that the great industrial concern of I.C.I. is inhuman and almost indecent in the way that it has relinquished a factory which has been in production there for more than a century and which not long ago employed 500 workers? Cannot this concern do something to put industry into the area?

Mr. Maudling: I believe that this company makes an immense contribution to the economic and social well-being of this country.

Gold Covered Articles (Hall-marking)

Mr. Dance: asked the President of the Board of Trade if he will introduce legislation to bring up to date existing

legislation dealing with hall-marking and gold covered articles.

Mr. Maudling: I am at present considering the Report of the Stone Committee on these subjects in the light of the various views I have received since its publication. I think that new comprehensive legislation is desirable but cannot say when it will be introduced.

Mr. Dance: I thank my right hon. Friend for that reply. Is he aware that the Report of the Departmental Committee on Hall-marking was presented in March, 1959? Can he give me any indication whether its recommendations are to be accepted? Is he further aware that the trade is extremely keen that hallmarking of quality plated goods should be introduced, as the trade believes that this would help greatly in its export drive?

Mr. Maudling: I agree that new legislation is desirable on this subject, but I do not think that I should be right to foreshadow at this stage what it would contain.

Oral Answers to Questions — NATIONAL FINANCE

Government Contracts, North-East Scotland

Mr. Hector Hughes: asked the Chancellor of the Exchequer if he is aware of the difference in the distribution of Government contracts as between England and North-East Scotland; and what steps he plans to secure the allocation of more orders to North-East Scotland.

The Financial Secretary to the Treasury (Sir Edward Boyle): No separate figures are available of Government contracts placed in North-East Scotland. Tenders for Government contracts are invited on a competitive basis but, other things being equal, preference is given to areas such as North-East Scotland which are listed as development districts. Instructions have recently been issued to all contracting Departments reminding them of these arrangements, and asking them to review their trades lists and specifications with a view to improving the opportunity of Scottish firms to tender. My right hon. Friend, the President of the Board of Trade, has also arranged


to draw the attention of Scottish firms to the possibility of tendering for Government work.

Mr. Hughes: Notwithstanding that Answer, does not the Financial Secretary realise that the invidious treatment of the north-east of Scotland, the invidious neglect of the north-east of Scotland, has long been a scandal which should be the subject of substantial planning by the Cabinet as a whole? Will the hon. Gentleman bring the matter before the Cabinet so that something constructive is done about it?

Sir E. Boyle: It is not my business to bring things directly before the Cabinet, but I can tell the hon. and learned Gentleman that I looked at the figures carefully, and it is not true that the proportion of Government orders placed in Scotland today is unduly low. I regret that I cannot go beyond what I said in my original Answer.

Lady Tweedsmuir: Is my hon. Friend aware that Aberdeen itself won a valuable contract only yesterday for a new ship costing about £¾ million, and that while we should like a great deal more done, we feel that this is a real encouragement, and an example of what the Government are trying to do?

Sir E. Boyle: I am very glad to hear what my hon. Friend has just said.

Mr. Hughes: On a point of order, Mr. Speaker. There is a difference in facts between the Minister and me, and in view of the unsatisfactory nature of the reply, I beg to give notice that I shall raise the matter on the Adjournment.

Private Companies and State Management Districts (Taxation)

Mr. Ridley: asked the Chancellor of the Exchequer how much Income Tax, Schedule D, and Profits Tax would be payable by a private company making the same profits as those made by the State Management Districts in the year ended 31st March, 1960.

Sir E. Boyle: I regret that I am unable to give this information.

Mr. Ridley: Since the State Management Districts have paid only £117,000 to the Exchequer, both in lieu of Profits

Tax and Income Tax, and in interest on the taxpayers' capital, will my hon. Friend look into this matter to see whether he is sure that the taxpayer is getting a real return on the money invested?

Sir E. Boyle: I will certainly try to do that. The difficulty is that in the Report on State Management Districts the figures necessary to calculate the capital allowances for tax purposes on plant are not given. It is, therefore, not possible to calculate, on the basis of existing figures, the amount of tax that would be payable by a private company with the same trading results. But I will certainly see what I can do.

Mr. P. Williams: While this is very interesting, would it not be better to sell them off?

Sir E. Boyle: I think that supplementary question raises issues rather wider than the one on the Order Paper.

Universities (Scientific Staff)

Mr. Boyden: asked the Chancellor of the Exchequer what proposals the University Grants Committee have to overcome the difficulties anticipated in recruiting scientific staff for the university expansion programme.

Sir E. Boyle: The existence of this problem is one of the reasons for a flexible expansion policy and the University Grants Committee has it very much in mind. Salaries were revised last year and the increase in recent years of the number of Department of Scientific and Industrial Research post-graduate training grants will contribute materially to the supply of potential teachers. I understand that the University Grants Committee is at present considering representations about a further salary revision and that the provision of adequate facilities for university staff—both for teaching and research—is also the object of their particular attention.

Mr. Boyden: Is it not highly desirable that more publicity should be given about university proposals in view of their importance to the general educational system? Cannot more announcements and publicity be given so that perhaps the matter might be discussed here?

Sir E. Boyle: I will certainly consider that helpful suggestion. It is a fact that the D.S.I.R. grants have gone up from 979 current in 1958 to 1,259 current in October, 1960, an increase of nearly 30 per cent. The importance of mathematics and science teachers is great. The importance of mathematics teachers for the whole of our education system is so great that I will consider the point the hon. Gentleman has made.

Dr. A. Thompson: Will the Minister bear in mind that the shortage of laboratory staffs and technicians is one of the most serious deficiencies in scientific and technical work in the universities, so much so that lecturers and assistant lecturers in some universities are having to do work which should be done by laboratory assistants? Will he give very special attention to this matter, particularly in the Scottish universities?

Sir E. Boyle: I will look into that.

Oral Answers to Questions — EUROPEAN COMMON MARKET (MINISTERIAL STATEMENTS)

Mr. de Freitas: asked the Prime Minister whether he will instruct all Ministers, except one designated Minister, not to make public statements on the effect on the consumer and on the home producer of food of the entry of this country into the Common Market.

The Chancellor of the Exchequer (Mr. Selwyn Lloyd): I have been asked to reply.
No, Sir.

Mr. de Freitas: Is the Chancellor of the Exchequer aware that, because of what the Minister of Agriculture had said previously on this point, the Home Secretary's speech in East Anglia was described in the farming Press as causing confusion? That was the word used in the agricultural community. Even if the right hon. and learned Gentleman cannot undo the harm that has been done, will he at least ensure that on these matters, at least, the Government speak with one voice, however unsatisfactory the one voice may be?

Mr. Lloyd: My answer to the hon. Gentleman's question must remain, "No". I do not think that it is desirable

from a constitutional point of view to designate a single Minister in the way the hon. Gentleman suggests.

Mr. Holt: Does not this reinforce the plea I made in a supplementary question to Question No. 1, that if the Government produced some documents on the subject, we could expect to get far more statements from different Ministers which, in fact, tied up, and did not contradict each other?

Mr. Lloyd: I do not think that that bears on the question of designating a single Minister.

Mr. Callaghan: In view of the effect of the last two speeches made by the Leader of the House, may we have an assurance from the Chancellor that his right hon. Friend will not be intervening in colonial affairs for some time?

Mr. Lloyd: That does not arise from this Question.

Mr. Gaitskell: Will the right hon. and learned Gentleman also see that the Home Secretary does not interfere in Treasury matters?

Oral Answers to Questions — NUCLEAR AND CONVENTIONAL WEAPONS

Mr. Brockway: asked the Prime Minister if he will make a statement on the policy of Her Majesty's Government as stated in the speech of the Minister of Defence to the Assembly of the Western European Union on the subject of the use of tactical nuclear weapons.

Mr. G. Brown: asked the Prime Minister whether he will make a statement on the policy of Her Majesty's Government as stated in the speech made by the Minister of Defence to the Assembly of Western European Union on 1st June, 1961, about the use of nuclear and conventional weapons.

Mr. Reynolds: asked the Prime Minister whether he will make a statement on the policy of Her Majesty's Government as stated in the speech of the Minister of Defence at the Western European Union Assembly on 1st June, about the use of nuclear and conventional weapons.

Mr. Selwyn Lloyd: I have been asked to reply.
No, Sir. There has been no change in the Government's policy on this issue and, in my view, nothing in my right hon. Friend the Minister of Defence's speech can be interpreted as indicating a change.

Mr. Brockway: Did not the speech of the Minister of Defence indicate that, in future, nuclear tactical weapons are to be the accepted instruments of our forces, whatever instruments are used by the opposing side? Does not that give rise to the very grave danger that a regional dispute might develop into a world nuclear war?

Mr. Lloyd: No. I do not think that my right hon. Friend's speech departed from previous statements on policy, in regard to which it has always been, I think, the policy of successive Ministers, and of right hon. Gentlemen on both sides, not to specify the precise conditions in which the nuclear deterrent would be used.

Mr. Reynolds: Is not the Chancellor aware that it is precisely because there has not been any change that these questions have been put on the Order Paper? Is he further aware that at the same session of Western European Union the American Admiral commanding in the Southern Area outlined a very big change in thinking in regard to that area which lessens the dependence on tactical and other forms of nuclear weapons? Is it not a fact that the Government cannot change their own policy because of shortage of manpower, caused primarily by the reluctance of the right hon. and learned Gentleman to spend money on defence because he would rather give it in Surtax relief?

Mr. Lloyd: I do not think that the hon. Gentleman can draw any of those inferences. Of course, conventional forces are part of the deterrent, and it is important that they should be as strong as possible. The position in regard to the use of the nuclear deterrent has not changed.

Mr. S. Silverman: Will the right hon. and learned Gentleman explain in clear and unambiguous language—[HON. MEMBERS: "Not possible."]—let him make the effort—what is the policy that he says has not been changed? He will remember that a year or two ago there was a Defence White Paper which

stated explicitly that we should use nuclear weapons first, without even announcing the circumstances in which we should use them? Will he say whether or not this is still the Government's policy?

Mr. Lloyd: When I learned that I was to be asked to answer this Question I remembered a debate on 2nd March, 1955, when Mr. Aneurin Bevan asked Mr. Attlee, as he then was, about this very matter. Mr. Attlee put it very rightly. He said:
…deterrents, by the possession of thermonuclear weapons, are the best means of preventing another war."—[OFFICIAL REPORT, 2nd March, 1955; Vol. 537, c. 2176.]
That is our position.

Mr. Silverman: May I again ask the right hon. and learned Gentleman to translate this multitude of meaningless words into a plain answer to a simple question? Are we to take it that his last answer was intended to say: "Yes, we do mean to use nuclear weapons first, and we do not mean to say in what circumstances we will do it"? Is the answer to that question "Yes" or "No"?

Mr. Lloyd: The answer is quite clear. It is that we have no intention of setting out all the rules so that an aggressor can exactly calculate what will be the response to any particular action.

Mr. Gaitskell: Will the Chancellor arrange for the Home Secretary to make a clear statement explaining the Government's policy?

Mr. Lloyd: Perhaps I might also invite the right hon. Gentleman to comment on Mr. Attlee's statement.

Oral Answers to Questions — OVERSEAS COUNTRIES (MEMBERS' VISITS)

Mr. Shinwell: asked the Prime Minister whether he will move for the appointment of a Select Committee to inquire into invitations received by hon. Members to visit foreign countries and Colonial Territories sent by private business interests and public relations firms; what is the purpose of such visits; what emoluments and expenses are paid; and whether, in order to acquaint hon. Members with overseas countries, he will provide funds to enable visits to be made under Government auspices.

Mr. Selwyn Lloyd: I have been asked to reply.
It is the view of my right hon. Friend the Prime Minister that the House would wish to continue to leave it to the judgment of hon. and right hon. Members to decide what invitations to accept. The purpose and financial arrangements of visits of the kind referred to are matters between individual hon. Members and those who invite them. In regard to the last part of the Question, I would remind the right hon. Gentleman of Her Majesty's Government's contributions to the Inter-Parliamentary Union and the Commonwealth Parliamentary Association.

Mr. Shinwell: If the Chancellor, on behalf of the Government, will not appoint a Select Committee, but prefers to leave it to various organs of the Press—some of them very reputable—to probe into and unearth some very unpleasant instances, that is a matter for the Government, but would he then consider—since he recognises the institutions of C.P.A. and I.P.U.—advancing sufficient funds to enable those institutions to send official delegations abroad, so that hon. Members can have an opportunity of seeing some of the overseas countries, and, no doubt, illuminating their minds? Will he do that?

Mr. Lloyd: The Government are already supplying considerable sums. The British Group of the Inter-Parliamentary Union receives an annual grant in aid of £11,500 and the United Kingdom branch of the Commonwealth Parliamentary Association receives £27,250. Those are substantial sums. I am not sure that it is in the public interest to increase those sums.

Mr. Fisher: Is my right hon. and learned Friend aware that a number of tours paid for by a Commonwealth Government in the last nine months have been of very short duration and, therefore, the points of view encountered by hon. Members during those tours have, necessarily, been of a somewhat selective character. Would it not be better, in order that hon. Members may get a more balanced view, if the Government financed these tours themselves?

Mr. Lloyd: Of course, I am prepared to consider the actual details of the sums made available. But, as a general principle, I am not sure that it would be in

the public interest to say that the taxpayer should subsidise these tours of hon. Members to all parts of the world.

Mr. Woodburn: Is not the right hon. and learned Gentleman aware that this is not a question of giving hon. Members joyful joyrides? It is a question of whether relationships between this country and foreign countries, this Parliament and Commonwealth Parliaments, are fully developed by the present limited scope. At meetings of the Commonwealth Parliamentary Association it has been pointed out that the scale on which this is done is too trivial to maintain good relations that should be maintained between the peoples of the different countries.

Mr. Lloyd: As I have said, I am prepared to look at any particular proposal with regard to this, because I am not necessarily in disagreement with what the right hon. Gentleman has said. I do not believe it is right, however, to suggest that the Government should undertake the sole responsibility for financially sponsoring a series of tours to enable all hon. Members to be acquainted with all foreign countries.

Sir G. Nicholson: Will my right hon. and learned Friend bear in mind that the Commonwealth Parliamentary Association tours are on a reciprocal basis and that a large part of the Colonial Empire cannot furnish invitations in reply? Will my right hon. and learned Friend maintain an open mind on the question of whether it would not be an advantage to Parliament and to the country if hon. Members knew more about the great problems with which they have to deal? I am not making any imputations, but surely the Government and the country would benefit from a little greater acceptance of responsibility for this.

Mr. Lloyd: I am prepared to examine any specific proposal.

Mr. Shinwell: Does not the right hon. and learned Gentleman appreciate that this is a very serious matter indeed? There are serious allegations being made outside, in the public Press for which I cannot vouch, and, therefore, I will not give details of them at this stage. In these circumstances, would not the right hon. and learned Gentleman consider, in spite of what he has said, that


the sums that are being made available to the recognised institutions are derisory? That has been stated over and over again by my right hon. Friend the Leader of the Opposition and by many prominent hon. Members opposite. In these circumstances, would it not be better, in order to preserve the integrity of hon. Members and to uphold the integrity of this House, that if visits are to be made overseas they should be under the auspices of a Government or semi-Government institution?

Mr. Lloyd: There are two separate issues involved here. On the last point, I cannot accept that hon. Members should only make visits overseas under the auspices of a Government or semi-Government body. That is a matter which must be to hon. Members to judge for themselves. On the question that the contributions being made available by the Government are derisory—and this is constantly being suggested in many fields—I will look at that aspect again.

Mr. Callaghan: Is the right hon. and learned Gentleman aware that a great many hon. Members who have gone overseas under private auspices have been reluctant to do so and have accepted the invitations only because they felt that there was no other way in which they could discharge their responsibility as hon. Members of this House to see conditions in the territories for which we are responsible? About two years ago I had the invidious task of arranging a visit for an hon. Member of this House to a territory which is under the direct control of this House and which had never been visited by any hon. Member. That visit was made at the expense of a private citizen.
Since the right hon. and learned Gentleman has gone a little way towards meeting us on this matter, will he consider a request from the Commonwealth Parliamentary Association for an increase in its subvention so that these visits abroad may be more marked than they are at present?

Mr. Lloyd: As I have said, I am prepared to look at this matter again, but I warn hon. Members that I cannot entertain a proposition that the Government should undertake the sole responsibility for sponsoring all visits overseas.

Oral Answers to Questions — ESPIONAGE (RADCLIFFE COMMITTEE)

Dame Irene Ward: asked the Prime Minister which members of the Radcliffe Committee have recent experience of modern offensive espionage, as apart from para-military or counter-intelligence.

Mr. Selwyn Lloyd: I have been asked to reply.
I think the membership of the Radcliffe Committee has been generally accepted as being well-balanced and covering a wide range of experience.

Dame Irene Ward: Is my right hon. and learned Friend aware, and will he convey to the Prime Minister, that people who are in a position to know think that this distinguished Committee is not sufficiently well balanced over the whole field? Would he also give an assurance that these people, who are in a position to know because of the services they have already rendered, will be permitted to give information to the Radcliffe Committee on the points I have raised in the Question without infringing the oaths of secrecy which they took when they took up the service?

Mr. Lloyd: I will convey to the Prime Minister the first part of the hon. Lady's supplementary question, although I do not think that he will agree with what she has suggested. I will examine the second part of her supplementary question.

Oral Answers to Questions — PRIME MINISTER AND PRESIDENT KENNEDY (CONSULTATIONS)

Mr. Rankin: asked the Prime Minister what consultations he had with President Kennedy on matters of mutual interest to the United Kingdom and the United States of America prior to the meeting between President Kennedy and Mr. Khrushchev in Vienna.

Mr. Selwyn Lloyd: I have been asked to reply.
As the House knows, my right hon. Friend the Prime Minister met President Kennedy at Key West and subsequently at Washington in March and April. The agreed joint communiqué issued after these talks, and my right


hon. Friend's answers to Questions in the House, made it clear that these discussions covered a wide range of matters of mutual interest. In addition to these personal talks, there are, of course, consultations at all times in the normal way between Her Majesty's Government, the American Government and other allied Governments.

Mr. Rankin: Since we do not hear very much about what happened at Vienna as a result of the previous conversations at Key West, could the right hon. and learned Gentleman—without violating anything that happened between the President and the Prime Minister later—tell us a little about any agreements that were reached at Key West, or are we to conclude that the identity of interest between ourselves and America on foreign affairs is now so complete that our foreign policy can be adequately expressed by President Kennedy?

Mr. Lloyd: I do not think that the hon. Gentleman is right to make any such deductions from what I have said, from what was contained in the statement, or from what was said in answer to questions by the Prime Minister.

Oral Answers to Questions — OFFICIAL SECRETS ACT (RADCLIFFE COMMITTEE)

Dame Irene Ward: asked the Prime Minister whether the Radcliffe Committee will examine the working of the Official Secrets Act.

Mr. Selwyn Lloyd: I have been asked to reply.
In so far as the security procedure and practices currently followed in the public service are affected by the operation of the Official Secrets Acts, it will be open to the Committee to examine the working of those Acts and, if it considers that any changes are required, to recommend accordingly.

Dame Irene Ward: While thanking my right hon. and learned Friend for that Answer, which is more satisfactory than I had imagined it would be, may I ask if he is aware that the judge who pronounced on the Blake case gave a great deal away under the Official Secrets Act? Could the statement of that judge be examined by the Radcliffe Committee?

Mr. Speaker: That Question is out of order.

Oral Answers to Questions — SOUTHERN RHODESIA (NEW CONSTITUTION)

The following Questions stood upon the Order Paper:

Mr. WALL: To ask the Secretary of State for Commonwealth Relations if he will make a statement about his recent visit to Southern Rhodesia.

Mr. MARQUAND: To ask the Secretary of State for Commonwealth Relations what consultations he had with members of the Government and with leaders of the Opposition political parties during his recent visit to Southern Rhodesia; and whether he will make a statement.

The Secretary of State for Commonwealth Relations (Mr. Duncan Sandys): With permission, I will answer Questions No. 84 and No. 90 together.
The Constitutional Conference in Salisbury in February laid down the basis for a new Constitution for Southern Rhodesia and it was agreed that the Governments of the United Kingdom and Southern Rhodesia would proceed to work out the details of a new draft Constitution, in consultation where necessary with those who attended the conference.
Some weeks ago, the Prime Minister of Southern Rhodesia convened a meeting of the groups concerned, to consult them on the framing of the more important sections of the Constitution and in order to obtain their views on certain matters, such as land, which were not dealt with during the Conference in February.
With one exception, all the groups concerned co-operated most helpfully, and the views they expressed have been taken fully into account. Although the National Democratic Party did not feel disposed to participate in these discussions, its views on all the main questions at issue were already known from the statements that it has made from time to time.
Last week, I went to Southern Rhodesia for a few days to have further consultations with the groups concerned and to settle with the Government of Southern Rhodesia a number of outstanding points in relation to the drafting of the new Constitution.
The new Constitution will have the effect of giving to the Africans, for the first time, substantial representation in the Legislative Assembly and will provide new constitutional safeguards which will enable the British Government to dispense with the reserved powers which we at present possess. These reserve powers have in the past proved to be a somewhat blunt instrument which, in practice, it was difficult to use.
The new safeguards include the enshrinement in the Constitution of a Declaration of Rights, in the creation of a Constitutional Council to examine and report upon all new laws and the grant of an unqualified right of appeal to the Privy Council on matters relating to human rights.
I am confident that these new provisions will provide safeguards for the liberties of all races which will be incomparably more effective than those afforded by the existing powers which they will replace.
Two White Papers will be presented to Parliament next week. One will contain a summary of the proposed changes. The other will give the detailed provisions of the new Constitution as a whole.

Mr. Wall: I congratulate my right hon. Friend on the success of these talks, which will bring in an era of true partnership. I have two questions. First, when does my right hon. Friend expect the referendum on the Constitution to take place? Secondly, during his conversations did he discuss the Constitution of Northern Rhodesia and the effect that this might have on any future referendum on Southern Rhodesia?

Mr. Sandys: It is, of course, for the Government of Southern Rhodesia to announce the date of the referendum. I understand that they have no desire to delay it longer than is absolutely necessary. The two White Papers which will be presented to Parliament here will, of course, be presented simultaneously to the Legislative Assembly of Southern Rhodesia, and will be debated there.
My visit was concerned with the Constitution of Southern Rhodesia, as I have explained; but, naturally, I spoke to Sir Roy Welensky about Northern Rhodesia as well as about numerous other problems of common concern.

Mr. Marquand: Does the right hon. Gentleman agree that it would be desirable for the House to debate these two White Papers at an early opportunity, since it is impossible to cover all the ground by question and answer when we have not seen them?
Did the right hon. Gentleman have any discussions while he was there this time with the National Democratic Party? Is he satisfied that, during the procedure of the referendum, the National Democratic Party will have full opportunities for consulting African opinion in Southern Rhodesia, since at present its meetings are banned and many of its members are still in detention? What chance will there be for Africans to take part thoroughly and properly in the public discussion of all these matters during the referendum?
Since the right hon. Gentleman has told us that Her Majesty's Government propose to surrender some of their reserved powers, has he made any concession at all on the matter mentioned in paragraph 34 of the White Paper of February last, namely, the request then made by the Southern Rhodesian Government that he should agree not to legislate except at the request of that Government? At that time, the right hon. Gentleman, quite rightly in our opinion, refused to make any commitment. Has he gone further? Has he made any sort of commitment on that matter this time?

Mr. Sandys: Taking, first, the matter of the National Democratic Party, the right hon. Gentleman asked me about public meetings. Of course, the arrangement for the holding of public meetings is really for the Government of Southern Rhodesia and is not my concern.

Mrs. Castle: What?

Mr. Sandys: Of course it is.
I invited all the political parties and other groups which had taken part in the conference last February to see me. I was able to see most of them. In some cases, when I was not able to see them, I spoke to the leaders on the telephone. The leader of the Asian group, for instance, was some distance away, and I had a long talk with him on the telephone.
I met about six of the leading members of the National Democratic Party, and I had a long talk with them of well over an hour, but, as is already known, it was their policy not to express any views on these matters. Although we discussed many matters of interest, I was not able to have a formal consultation with them on the specific points on which I was concerned to have their views.

Mr. Callaghan: But do the African people agree?

Mr. Sandys: It is all very well for the hon. Gentleman to say that. I did my best to consult with these people. I invited them to come to see me. They came. I had a long talk with them. I pressed them to express their views on these points. However, as I said in my opening statement, I was already aware of their views, because they had made them known to me and to the public, and also in statements of a confidential character which they had given us on various subjects. I was aware of their views, but I still thought it right, before finally agreeing to the text of the Constitution, to give them a further opportunity to speak to me.
As I have explained, all they said to me was, "You know our views already. We have expressed them on a number of occasions. We do not wish to add anything further today", because it is part of their policy of protest—they are quite entitled to it—against the banning of meetings in the native reserves.
With regard to the point raised by the right hon. Gentleman concerning legislation, certainly no new commitment has been entered into; nor am I able to do so. This is a constitutional matter. It is not a matter for the Government. But the fact remains, I think, that in the view of most constitutional lawyers, since the grant of self-government to Southern Rhodesia in 1923, a convention has become established that the Parliament here at Westminster does not legislate for Southern Rhodesia, or in respect of any other territories which have domestic self-government, on matters within the sphere of competence of the Legislative Assembly of Southern Rhodesia as defined by an Act of this Parliament.
Perhaps the right hon. Gentleman will ensure that the question of a debate is raised through the usual channels.

Mr. Marquand: Despite what the right hon. Gentleman said about the constitutional position, may we have it clear that the constitutional position is that, if for any reason all these talks broke down, or there was a collapse of Government in Southern Rhodesia, Her Majesty's Government and this Parliament still have the right to legislate for Southern Rhodesia?

Mr. Sandys: Since this may well be a matter of controversy in the referendum campaign, I have to choose my words very carefully indeed. All that I would say is that, whatever the constitutional position is, nothing that I have done has altered it in any way.

Mr. Dugdale: The right hon. Gentleman has said that the reserved powers under the convention should not be used. Is it not a fact that the mere existence of those powers and the knowledge that they did exist has in the past prevented a great deal of discriminatory legislation from being introduced in Southern Rhodesia?

Mr. Sandys: When the right hon. Gentleman reads my statement in HANSARD, he will see that his supplementary question was based on a misapprehension.

Mr. Brockway: While leaving the broader issues for debate, may I ask the right hon. Gentleman whether he will give a rather fuller answer on an immediate point? He went to Southern Rhodesia to try to get a constitutional settlement. Is it not the right of the African people to hold meetings and to consult with their own supporters and the African population an essential condition if there is to be a constitutional settlement? While the matter may be in the hands of the Southern Rhodesian Government, will not the right hon. Gentleman use all his influence to enable the Africans to enjoy that right?

Mr. Sandys: I quite understand the point, but I do not think that it is pertinent to my consultations with the National Democratic Party. We have had general discussions about all these matters. We know its general views, and that there is broad agreement on the kind of safeguards which are desirable to replace the reserved powers exercised by the British Government.


But the kind of points about which I wished to consult the National Democratic Party was the exact drafting of the definition of discrimination and the precise arrangements for the election of the membership of the Constitutional Council. It is not possible to get much wisdom, on matters of that kind, from a mass meeting in the native reserves. It could have given me its advice and views on these points if it had wished. Although I understand the hon. Gentleman's point, it is unrelated to the problem of consultation on the detailed drafting of the constitution

Mr. F. M. Bennett: Since we all must want a fair and reasonable settlement for all races in Southern Rhodesia, is it not the view of my right hon. Friend that we should rest on his statement and wait until we have had an opportunity of studying the White Papers?

Mr. Callaghan: Is it not dangerous—indeed, is it not worse than dangerous; may it not be a breach of trust?—for us to regard these talks as successful if the Minister is unable to say that the Africans, for whom these reserved powers were devised and on whose behalf they are exercised, are ready to give to the Southern Rhodesian Government powers which, at least in reserve, are now attributable to Her Majesty's Government?
Is it not of vital importance that the Minister, whether he has made one, two or three approaches to them, should ensure that the channels of communication are open so that he can come to this House and give us a solemn assurance that the Africans on whose behalf we exercise these powers are ready for them to be relinquished to the Southern Rhodesian Government?

Mr. Sandys: These are the precise points which were discussed in great detail with all the African representatives at the conference which we had in February. At that conference it was agreed by all concerned that the reserved powers which are exercised by the British Government could properly and to everyone's advantage be replaced by more effective safeguards, namely, the Declaration of Rights, the Constitutional Council and appeal to the Privy Council. I think that all parties, all groups, which took part in the confer-

ence have agreed that that is the right way to deal with the matter.
The only points on which I wished to consult them, not on these broad issues, were the precise arrangements—which, I am satisfied, are satisfactory, but none the less I wanted to give them the opportunity to comment on them—for the definition of the terms of discrimination in the Declaration of Human Rights and the precise arrangements for setting up the Constitutional Council. But there is agreement on what should be the safeguards to replace the reserved powers. I therefore have no hesitation in saying to the House that I am confident that these new safeguards will be more fully effective from the standpoint of the interests of all races in Southern Rhodesia than the reserved powers.

Several Hon. Members: rose—

Mr. Speaker: Order. I do not think that we can debate these wide matters now.

BUSINESS OF THE HOUSE

Mr. Gaitskell: May I ask the acting Leader of the House whether he will state the business of the House for next week?

The Chancellor of the Exchequer (Mr. Selwyn Lloyd): Yes, Sir. The business for next week will be as follows:

MONDAY, 12TH JUNE—Supply [16th Allotted Day]: Committee.

A debate will take place on Agriculture in England and Wales.

Consideration of the Motion to approve the Fertilisers (United Kingdom) Scheme, 1961.

TUESDAY, 13TH JUNE, and WEDNESDAY, 14TH JUNE—We shall make further progress in Committee on the Finance Bill.

THURSDAY, 15TH JUNE—Supply [17th Allotted Day]: Committee.

A debate will take place on the need for an Inquiry into the Case of the late Timothy John Evans.

The Chairman of Ways and Means informs me that he proposes to set down an opposed Private Bill—the London


County Council (General Powers) Bill [Lords]—for Second Reading at seven o'clock this evening.

FRIDAY, 16TH JUNE—Consideration of private Members' Motions.

MONDAY, 19TH JUNE—It is hoped to complete the Report stage of the Licensing Bill by about seven o'clock.

Afterwards, other Orders will be taken which will be announced later.

Mr. Gaitskell: First, is the right hon. and learned Gentleman aware that, although Thursday is a Supply day and the debate has been selected by the Government, it is not our intention to divide the House? We hope that this issue will be treated entirely as a non-party affair which, nevertheless, merits urgent discussion.
Secondly, since we were unable to put further questions to the Secretary of State for Commonwealth Relations today, will the right hon. and learned Gentleman make arrangements for a debate on the proposed new Constitution for Southern Rhodesia as soon as possible after the two White Papers are published?

Mr. Lloyd: I note what the right hon. Gentleman says in his first question. I will tell my right hon. Friend the Leader of the House about the suggestion contained in his second question. No doubt it will be discussed through the usual channels.

Mr. Biggs-Davison: Is my right hon. and learned Friend aware that last Thursday, after the Leader of the House made his business statement, I asked him about the Motion on the Order Paper concerning the desire of very many hon. Members that President Tshombe of Katanga should be released? Is he further aware that my right hon. Friend said that he would draw the matter to the attention of his colleagues? Can my right hon. and learned Friend say what has happened about this matter

[That this House urges Her Majesty's Government, in view of the increasing threat to law and order in the Congo and especially in Katanga, and the consequent threat to neighbouring British territories, arising from the arrest of President

Tshombe in violation of the safe-conduct he was guaranteed by the Congo Government, to take immediate steps to press Mr. Hammarskjöld personally to intervene to secure President Tshombe's release, in accordance with the original United Nations Congo resolution.]

Mr. Lloyd: My statement dealt with the business for next week. I do not think it appropriate for me to attempt to answer my hon. Friend's question.

Mr. Gaitskell: I understand that I inadvertently used the word "Government" when referring to the Opposition. This may be in anticipation of things to come, but I should like to correct it.

Mr. Shinwell: Can the right hon. and learned Gentleman say when the Government propose to take the remaining stages of the Army and Air Force Bill?

Mr. Lloyd: I cannot give any specific date, but it will be in the near future.

Mr. Darling: Will the right hon. and learned Gentleman tell us the Government's intention with regard to the Weights and Measures Bill, which, obviously, will not be introduced this Session?

Mr. Lloyd: I have nothing to add today to what has already been said about that.

Mr. Thorpe: Can the right hon. and learned Gentleman help us with a constitutional point of some importance relating to the capacity in which he is acting? One of his right hon. Friends has told us that two White Papers will shortly be published relating to Central Africa. According to those White Papers, this House will be asked to surrender certain reserved powers, Can the right hon. and learned Gentleman give us an assurance that a debate will take place on that subject before a public referendum on it is held in Central Africa? Would he not agree that the first persons who should be consulted are the elected representatives both in Southern Rhodesia and here, and that a referendum should follow debates in the two Chambers and not precede them?

Mr. Lloyd: I certainly cannot give an answer to that question or any such assurance in making the business statement this afternoon, but I will see that the point made by the hon. Member is brought to my right hon. Friend's attention.

Mr. Jay: Is the Home Secretary's absence today due to his inability to say what has happened to the Government's principal Bills?

Mr. Lloyd: My right hon. Friend is at York, at the wedding of His Royal Highness the Duke of Kent and Miss Worsley.

Dame Irene Ward: May I ask my right hon. and learned Friend, concerning a number of Motions on the Order Paper, how many signatures must be attached to a Motion in support of it before democracy operates and we are able to deal with it?

Mr. Lloyd: I am not aware of any precise rule on that matter.

Mr. Strauss: Can we be told what are the prospects for the Road Traffic Bill, and whether there is any doubt that it Will be put forward this Session? Will the Government bear in mind that this Bill was mentioned in the Queen's speech and that the increase in the National Health Service charges was not?

Mr. Lloyd: That Bill is still in another place and I have no statement to make about it today.

Mr. Rankin: Is the right hon. and learned Gentleman aware that the report of the Sub-Committee of the Advisory Committee on Shipbuilding has been before the House for a considerable time and that we were informed previously that nothing could be done about a debate on shipbuilding until that Report was before us? It has now been accompanied by other Reports. Since the Leader of the House is safely out of the way at York, can the Chancellor of the Exchequer now tell us when the Government propose to find time to debate their own Report?

Mr. Lloyd: I know that this is a matter which my right hon. Friend has

in mind, but there will not be a day for debating it next week.

Mr. Chapman: Is it intended to take the Third Reading of the Licensing Bill a week on Monday, or only to try to complete the Report stage?

Mr. Lloyd: No, it is not intended to take that on Monday week. My right hon. Friend's intention is, I think, that the Bill should be reprinted and taken later.

Mr. G. M. Thomson: May I draw the right hon. and learned Gentleman's attention, both in his temporary capacity as Leader of the House and in his more permanent capacity as Chancellor of the Exchequer, to the Motion on the Order Paper concerning the inadequacy of the plans for expanding university provision in Scotland?
[That this House regrets the failure of Her Majesty's Government to announce plans for the expansion of the number of university places in Scotland on a scale sufficient to meet the estimated increase in the applications for university education during the next decade; deplores the fact that, at a time when seven new universities are to be provided for England, students in Scotland will be taken into overcrowded classrooms, in institutions deficient in up-to-date equipment and amenities; and condemns the failure of the Government to provide the means of achieving a long-term programme of university education which will enable Scotland to retain her traditional place in the forefront of higher education and to meet the challenge presented by a rapidly changing world.]
In view of the general anxiety about this matter in Scotland, will the right hon. and learned Gentleman consider the possibility of providing time for this issue to be debated in the House?

Mr. Lloyd: I will certainly see that my right hon. Friend the Leader of the House considers that matter, but there will not be time next week.

Mr. Thorpe: On a point of order. Would it be in order to congratulate the right hon. and learned Gentleman for managing, during the last half hour,


to combine more offices than any other hon. Member since the time of the Duke of Wellington?

Mr. Speaker: It would not be in order at any time, least of all during business questions.

Mr. Mellish: Will the Chancellor of the Exchequer please take note and pass on to the appropriate quarter that many of us on this side are alarmed about economic conditions in Northern Ireland? Although we had a debate a short while ago, the situation is worsening and we on this side consider that the time has now come when the Government should initiate a debate and say precisely what they propose to do to relieve the plight of the unfortunate people there?

Mr. Lloyd: I will certainly convey the hon. Member's suggestion to my right hon. Friend.

Orders of the Day — FINANCE BILL

Considered in Committee [Progress 7th June].

[Sir GORDON TOUCHE in the Chair]

Clause 14.—(DOUBLE TAXATION RELIEF AGREEMENTS: EXEMPTIONS FROM FOREIGN TAXATION TO PROMOTE DEVELOPMENT.)

3.56 p.m.

The Solicitor-General (Sir Jocelyn Simon): I beg to move, in page 9, line 42, at the end, to insert:
Provided that this section shall not operate so as to increase, under paragraph 7 or 8 of the said Sixteenth Schedule, any amount of income or of income received in the United Kingdom.

The Chairman: I think that it would be convenient to discuss with this Amendment the Amendment in page 9, line 45, at the end, to insert:
(3) In the said Schedule sub-paragraph 2 of paragraph 7, and sub-paragraphs 2 and 3 of paragraph 8, shall not apply to relief given under this section.

The Solicitor-General: Thank you, Sir Gordon. The Government Amendment—

Mr. John Diamond: I apologise for interrupting, Sir Gordon, but it was simply not possible to hear what was said. Is it the case that the first two Amendments are not selected and that only the Amendment in line 42 is at present being discussed?

The Chairman: We are discusssing that Amendment and the one in line 45.

The Solicitor-General: The Amendment which I have moved raises the same point as the Amendment in line 45 in the names of a number of my hon. Friends, but, for reasons which I hope it will not be necessary to go into, ours is technically preferable. Both Amendments raise a rather recondite point. To explain it, it will be necessary for me to explain the purpose of the Clause. I hope that the Committee will, therefore, bear with me in the hope that anything which I say now on the Amendment will redound to the benefit of any debate which we may want to have on the


Question, "That the Clause stand part of the Bill".
The Clause is designed to enable double taxation agreements to be made so as to embrace a type of tax relief which some of the underdeveloped countries find particularly advantageous to them. As the Committee knows, under the existing law double taxation agreements can be entered into between Her Majesty's Government and a foreign Government to give mutual relief against a single source of income being taxed both in the country of origin and, roughly speaking, in the country to which it is remitted. For example, if a United Kingdom resident enjoys an income from a foreign source which is remitted to this country, without a double taxation agreement it would be taxed both in the country of origin and on its receipt in this country.
Under the existing law, double taxation agreements can be entered into which will limit the total amount of the tax payable to the highest amount payable either in the country of origin or in the country to which it is remitted. For example, if income is remitted to this country from a foreign country and it bears Income Tax at only 4s. in the £ in the foreign country, credit will be given for the amount of tax represented by that 4s. against the higher tax which is exigible in this country and only the balance will be payable in this country.
Certain underdeveloped countries give what are sometimes known as tax holidays; at any rate, they give tax reliefs to encourage all types of investment, particularly investment in the nature of long-term funds to help the setting up of industry in those underdeveloped countries and generally to promote their economic expansion and welfare. The effect of the existing double taxation agreements is that the benefit of those reliefs is frustrated.
What happens, in effect, is that in so far as tax is reduced and dispensed with in the country of origin it merely means that the tax liability in this country is higher; and, as I said, the benefit is frustrated in the country of origin. I think that I carry the whole Committee with me when I say that that is undesirable, because it is stultifying the effect which is conducive to the industrial development and the general economic progress of the underdeveloped countries.
The object of this Clause is to obviate the frustration of the foreign tax relief, by enabling credit to be given against United Kingdom tax for the foreign tax which is spared as well as the foreign tax which is paid. That cannot be done, as I have said, under existing law. Indeed, the expression "double taxation agreement" really crystallises the difficulty, because there is in the case I postulated no double taxation; the taxation is spared in the country of origin.
That brings me to the need for the Amendment, because the Clause, as it operates, does have an untoward effect. The general position in double taxation agreements is that the amount of income which is to be assessed to United Kingdom tax is the gross amount before the deduction of the overseas tax. That is necessary because otherwise there would be excessive relief to the taxpayer. What he would get, in, effect, would be, first, the deduction of the overseas tax in order to arrive at his assessable income in the United Kingdom, and, secondly, the same sum as a credit against United Kingdom tax on the sum so reduced.
To give an example in the simplest case of all. If we have a United Kingdom resident who got an income of £100 from a foreign source with £20 overseas tax, what he would actually receive would be £80; and if £80 only were charged to the United Kingdom tax he would get the double benefit of first of all of having the £20 deducted before his income was assessed to tax and then the same £20 set against United Kingdom tax on that £80, £100 less £20.
So what the paragraphs of the Sixteenth Schedule referred to in the Amendment say is that the foreign tax of £20 in the case I postulated must be added back to the net sum received, and under the existing double taxation agreement that is obviously the correct procedure in order to arrive at the correct result. But that does not work at all in the case with which we are concerned in this Clause. The effect of adding back the overseas tax to the net income received is quite irrelevant to the case with which the Clause deals, because the Clause proceeds on the very basis that no tax has been paid.
In the example I gave it would mean that the income which was assessed to


United Kingdom tax would not be the £100 actually remitted but £120, which is £20 more than was ever received at any time. What the Amendment does is to prevent the Clause from operating in that way in the particular circumstances which I have described, and I hope that it will commend itself to the Committee.

Mr. James Callaghan: I should like to say a word about this Amendment. I listened to the Solicitor-General's explanation, which was clear, as always, and I have also had the benefit of advice from my hon. Friends to whose advice I have listened for the last thirty years, and I think that I understand the purpose of the Amendment. It is, of course, of some marginal importance, but I should like to say that while I do not oppose this Amendment I think that this is an example of how the Treasury strains out the gnat and swallows the camel.
Frankly, it is only of marginal importance in the sort of territories the right hon. and learned Gentleman was talking about, the underdeveloped territories. In those territories the real nigger in the woodpile, if that is not an inappropriate term in this connection, is the Treasury, because of its ideological objection which it has to allowing the Colonial Development Corporation to expand its enterprises in territories which have become independent. Having taken some recent advice on this matter, I do not think that this Amendment would be either here or there; in certain circumstances it would really be of no very great importance.
If only the right hon. and learned Gentleman would get his Treasury officials over this hurdle that they will not allow the Colonial Development Corporation to expand its activities. I do not know, but I cannot think of any businessman on the other side of the Committee who would ever agree that his business should not be allowed to expand but that it must remain static, but that is the prescription which is placed on the activities of the Colonial Development Corporation.
As the object of this relief is to enable development to take place in these territories, and to encourage development

there, all I want to say to the Solicitor-General is that I think that he could really do a great deal more to help that other than by this Amendment if only he would allow the Colonial Development Corporation to expand its activities in these territories. That is the simple message I want to leave with him.
We have raised it many times. We never get any acknowledgement from the Treasury of the force of the argument, which is held in common by the Corporation and on his own side and which certainly would be held by any businessman in connection with his own business. I imagine that it is like riding a bicycle: unless you go on you will fall off. No businessman could possibly ever accept a condition that he must not be allowed to expand his business.
In the constantly diminishing Colonial Territories which we have at the present we not only place an unnecessary burden on the Colonial Development Corporation, which may or may not be regarded as important, but we offset the advantage or one of the advantages of this Amendment which the Solicitor-General has commended to us because we are handicapping ourselves by preventing the Corporation from doing the job it was set up to do.
I put it to the Solicitor-General that if he is thinking in terms of developing investment and expanding activities then, before the next Finance Bill comes round, he should release the Colonial Development Corporation from the straitjacket in which he has put it.

Mr. G. R. Mitchison: On a point of order. In view of what the right hon. and learned Gentleman has said, and of what my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) has also said, are we to consider this debate as being a debate on the Question "That the Clause stand part of the Bill", or are we to have a separate debate on that Question?

The Chairman: It occurred to me that it might be convenient to have one discussion on this Amendment and on the Clause, but it is a matter for the Committee.

Sir John Barlow: Many of us who have been concerned about this matter for many years are grateful to the Government


for trying to put it right. There has been considerable difficulty in overseas taxation of this sort for many years and the House of Commons is anxious that under-developed countries should be helped. In the past taxation has been very onerous on people who have been trying to do that and for that reason we welcome the Amendment.
I should like to ask the Chancellor of the Exchequer, however, to look at the matter again. It is a very complicated subject and I suggest that in certain circumstances, by grossing up, the Government may overdo the case and take more in taxation in some cases than they had actually proposed to do. Three Amendments have been tabled more or less on these lines. This is much too complicated a subject to go into here and now.

Hon. Members: Why?

Mr. Diamond: On a point of order. The hon. Baronet the Member for Middleton and Prestwich (Sir J. Barlow) refers to three Amendments, the third being the Amendment in his own name Which is No. 114 on the Notice Paper, but, in fact, comes after the Amendment which has been moved and which is No. 120. You, Sir Gordon, have not indicated whether the Amendment in the hon. Baronet's name will be called or not.

The Chairman: It will not be called because it is wider than the Budget Resolution.

Sir J. Barlow: I hope that the Government will look into this matter carefully before we reach the next stage of the Bill. I am sure that we all want to do the right thing. We want to help the under-developed countries. We do not want to overtax any dividends coming into this country, but, at the same time, we want to do the just thing. I urge the Government to have another look at the matter and to consider whether they are doing by means of the Amendment exactly what they wished to do in the circumstances.

Mr. Diamond: We are, apparently, to have a discussion on the principle of the Clause as well as on this Amendment. I hope, therefore, that the Solicitor-General will go further and explain why he is limiting the relief to relief under

double taxation as opposed to further relief under unilateral agreements. No doubt the right hon. and learned Gentleman has that in mind, but I hope that he will indicate why the Clause follows this form.
Those of us who have received literature on the technicality of the Clause have had brought to our notice that because of the way in which the Clause is drawn there will be inevitable delay between the point of time of the passing of the Bill and the point of time of the necessary amendment of arrangements between two countries which form the basis of double taxation relief. We are told that there might well be delay which would prevent the Clause coming into effect so as to give relief immediately. The Solicitor-General is the one who is able to read a Clause of this kind, and not myself, and, therefore, I should be grateful if he would say whether this is the case, or whether, as soon as the Bill becomes law, the relief provided in the Clause will have immediate effect.
The third question that I would ask, which refers purely to the Amendment, may seem unnecessary, but I had better ask the Solicitor-General whether he is satisfied that the Amendment is necessary. Is he satisfied that under the Clause as it stands a tax not paid in a foreign country, not collected and not charged, has to be added to the gross amount to assess the amount in this country?

Sir Henry d'Avigdor-Goldsmid: Taking advantage of the pleasurable fact that a Clause of this kind is being discussed at a time other than the twilight hours, I should like to congratulate the Chancellor on the idea that inspired it. I cannot help feeling, however, that my hon. and learned Friend's generous desire to help underdeveloped countries has been frustrated by the massive caution of his officials who may have seen with some regret cancellarian generosity transported into a net loss to the Revenue. We have, therefore, an unfortunate situation where this important purpose will be frustrated, as far as pioneer reliefs are concerned, for a good many countries offering these reliefs and to which the additional investments attracted by the reliefs would be important.
This is an enabling Clause. It would enable my right hon. and learned Friend to negotiate double taxation agreements with the various countries concerned. I understand that views have been expressed that if this were treated not under the head of double taxation, but of unilateral agreement—a point made by the hon. Member for Gloucester (Mr. Diamond)—this country would be losing bargaining power. I wonder how much weight there is in that consideration. First, we in this country do not offer special inducements in the form of tax holidays for overseas investment here. Certainly—and this is more to the point—there is not much likelihood of countries which offer relief on taxation to induce investments being in a position to invest funds on an important scale in this country. If they were they would not need to offer these tax holidays. The bargaining argument, therefore, falls to the ground.
4.15 p.m.
The Treasury would wish to deal with the most important countries with which we have double taxation agreements and it would be a long time indeed before the lesser countries—those without double taxation agreements—for the assistance of which the Clause was inserted, would reach the head of the queue. I ask my right hon. and learned Friend, therefore, to consider whether the generous instincts which prompted the Clause are not being frustrated by the way it is framed.
I should like to refer particularly to the remarks of the hon. Member for Cardiff, South-East (Mr. Callaghan). One of the advantages of private investment over public investment is that there is an element of precision about it, that is to say, where there are international agreements there are constant calls for their revision. Many years ago there were long negotiations between this country and the Argentine over the sale of the Argentinian Railways. These were almost infinitely protracted negotiations and the terms were changed constantly. In present circumstances, if a business makes a business investment those terms are settled legally when they are made and they are not subject to revision except by the agreement of both parties.
I suggest to my right hon. and learned Friend the Solicitor-General and to the hon. Member for Cardiff, South-East,

that there are advantages in having the terms of reference clearly defined as against the spaciousness and the number of things unsaid in an agreement between one nation and another. Particularly when it is between a rich nation and a poor one, one finds that the rich nation will be asked to make some modification of its terms because of later circumstances, which would not occur in the case of a commercial investment.

Mr. Callaghan: The Colonial Development Corporation, as the hon. Member knows, does not operate on a nation-to-nation basis. It makes commercial investments with the aid sometimes of local directors and local capital on a purely business basis, and a number of these countries wish the Corporation to carry on doing so after their independence.

Sir H. d'Avigdor-Goldsmid: The hon. Gentleman knows a great deal more about the Colonial Development Corporation than I do. But where we have an organisation which is, in fact, controlled politically, the political argument must come in. I do not want to put more weight on it than that, but the hon. Gentleman must accept that.
There is one point about the Amendment moved by my right hon. and learned Friend the Solicitor-General. It is difficult to go into the arithmetic of taxation on the Floor. The hon. Member for Gloucester (Mr. Diamond), like the hon. Member for Glasgow, Craigton (Mr. Millan), brushes aside these difficulties, but I should like an assurance on this point.
Perhaps I may roughly call it the auctioneer's guinea. If a sale is made at an auction and an article is knocked down in guineas, and if the seller expected to receive the same number of pounds and the auctioneer to take his commission in shillings, the seller would find that he was mistaken. The auctioneer deducts from the price he pays to the seller a commission of 5 per cent. on the full amount. For the sake of argument, in the case of an article sold for 1,000 guineas, the seller receives not £1,000, but less than that, because the auctioneer takes his commission on the guineas. I see the hon. and learned Member for Kettering (Mr. Mitchison) is looking puzzled, but I should have


thought this a reasonably clear proposition.

Mr. Mitchison: It is kind of the hon. Gentleman, but I followed it perfectly.

Sir H. d'Avigdor-Goldsmid: Then I was wrong in my interpretation of the expression of the hon. and learned Member for Kettering.
The point here is that under the present double taxation legislation the gross amount of the tax spared is added to the gross amount of the dividend and that sum is then subject to the deduction of British taxation at the standard rate, that is, dividend plus interest spared. From the amount of British tax levied there is given a notional credit for the amount of foreign tax that was spared and then there remains a residuary charge which the recipient has to pay.
If the notional tax spared were exactly the same as the British rate of taxation—I must apologise for arithmetic, but this is a technical point and I do not know how to put it without the use of arithmetic—if there were a dividend of £100 and the notional tax spared were £54, British taxation would be charged on £154, which is about £80.

The Solicitor-General: The Solicitor-General indicated dissent.

Sir H. d'Avigdor-Goldsmid: I am glad to see my right hon. and learned Friend is shaking his head. This is a thing which has been worrying me and is the basis of an Amendment which was put down but not selected. If this point has been overcome in the Amendment moved by my right hon. and learned Friend, that is a very satisfactory state of affairs. I am quite certain that if it has not been overcome he will undoubtedly put it right in this or a later Finance Bill.
I conclude by saying that this Clause shows the generosity of the Chancellor which, I hope, will not be frustrated.

Mr. Geoffrey Stevens: On a point of order, Sir Gordon. I am sorry to harp on a point which has been raised before, but I am not clear about the Ruling you gave. I have a point to raise which is decidely in connection with Clause 14, but equally certainly has nothing to do with the Amendment we are discussing. Is there to foe a debate on the Question

"That the Clause stand part of the Bill"?

The Chairman: We are taking the Amendment and the Clause together.

Mr. Mitchison: The first question which I wish to ask is a minor question on drafting, but I find it difficult to see how this section shall not operate to increase income or income received in the United Kingdom. No doubt it has the notional effect which the right hon. and learned Gentleman explained. But perhaps, to reassure me at any rate, he will tell us that these are the appropriate words for what he intends to do.
From that, I turn not to the detailed point raised in the Amendment but to the general intention of the Clause which, as I see it, is this: that on what we might call for the moment development expenditure, where it receives this particular form of encouragement in a foreign territory, no tax, ex hypothesis, is payable to the foreign Government, and this Clause will ensure that no tax is payable to this country.
Accordingly, as I understand it, the effect will be that to the extent of the encouragement given by the foreign country, to the extent of the tax help, whether total or partial, that slice of income escapes tax in either country. If I am wrong, I should like to know. That seems to be the clear intention of the Clause, and I hope that the Amendment may be correctly described as a comparatively minor piece of machinery to ensure that that end is reached.
If that is the position, this, of course, is a considerable concession from the fiscal point of view. Whether or not it is sufficient is a matter on which my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) is more competent to speak than I am. I wish to know what it will amount to. I appreciate that there are difficulties about giving anything like an exact figure. But the three Clauses we are to discuss today have one peculiarity. Neither in any speech in connection with the Budget, nor with the Bill, nor in the Financial Statement itself is there any mention at all of the financial results which are contemplated. I should have thought that a most important matter on which we are entitled to be told either that the Government have no idea what the


result will be, or what kind of result they anticipate.
I should like to remind the Government that estimates were given in connection, with the overseas trading corporation. Rumour has it—but rumour is a fickle jade—that these estimates were proved to be somewhat incorrect. I do not wish to go too far into this matter, but I should like to know, both in relation to this Clause and, in due course, in relation to the other two Clauses, what are the fiscal hopes, so far, of the Government. It is odd to have three Clauses of this sort in a Finance Bill and to find no mention of them at all in the Financial Statement, or, at any rate, of the yield that they are expected to give, or the results that they are expected to produce one way or the other.
This is, of course, a tax concession and it seems to me that the third of these Clauses is also a tax concession. I am not certain how the second will work out. But I think that we ought to be given the best estimate which the Government can give us. It is a matter to which we on this side of the Committee attach considerable importance. We are anxious that encouragement should be given to the extent of this Clause and, indeed, well beyond the extent of this Clause, to the expenditure likely to attract a tax holiday in a foreign country.
We are bound to consider the total amount and to make come comparison between the fiscal results as regards private expenditure and the possibilities of the same sort of thing being done in a way which would have a very different fiscal effect. I have in mind the possibility of Colonial Development Corporation action, or something of that sort. As the law is at present, it clearly would not apply in all the cases to which this Clause will apply, but I think that we ought to be in a position to make a comparison. At the moment there is the fiscal point of view between what is being done in the one way, that we cannot discuss here, and what is contemplated to be done by this Clause in quite a different way.
4.30 p.m.
It seems to me that there is a very considerable variety of ways in which help can be given to under-developed

countries in the course of development, but the one we are considering depends, as I see it, on the initiative of the country in question. It seems to follow, unless I have misconceived the purpose of the Clause, that the country in question can decide to give a tax holiday and thereby oblige the Exchequer to relieve from British taxation part of the money which would otherwise have attracted British tax.
We are getting a fiscal concession in which the initiative depends, and solely depends, I suppose, on the underdeveloped country, unless we are to be told that all this in its turn depends on double taxation agreements, and there is no obligation to make a double taxation agreement. I hardly think that the Treasury would wish to use an argument of that sort and differentiate in that way and on those lines between cases where help of the same kind may be given by foreign countries.
Then, we ought to be told, if possible, whether there are particular cases in mind. I do not wish to interfere with negotiations, or anything of that kind, but wish to have it clear that these fiscal holidays are intended to be for countries that need assistance. If the position is as I have outlined, it seems to me that in certain circumstances the Government here would be put in an extremely difficult position by a country that was not under-developed at all giving relief of this kind. I can see circumstances in which it could be to the advantage of that Government to do so.
I ask these questions in all seriousness, and I say to the Government, finally, that I think I am right in suggesting that there has been some comment in the Press on the amount of money which is escaping taxation—not, I think, so much money of the character considered here, but foreign remittances of large international companies; I think that this is perhaps a case of "no names, no pack drill"—domiciled in this country and operating through an overseas trading company and the like, and a good many others. It is always a possibility that machinery of this kind, well-intentioned though I believe it to be, and much as I approve the intended purpose of this Clause so far as it goes, could be used to escape British taxation, and nobody wants that to be done. It is, therefore, in a rather inquiring, but not


necessarily critical, spirit that I approach this Clause at present.

Mr. Stevens: Far be it from me to look a gift pioneer relief in the mouth, but in Clause 14 the Government mean well, I am sure. I think that it is undoubtedly true that at some time in the future, in certain circumstances, so far as operations in other countries are concerned, some people will be placed in an equal position with companies operating in the same countries, but not managed or controlled in the United Kingdom. It is not a question of giving unusual tax advantages to those companies managed and controlled in the United Kingdom, but of putting them on the same footing as companies not managed and controlled abroad.
Like other hon. Members, I am very sorry that these provisions are not dealt with through the Seventeenth Schedule of the 1952 Act—the unilateral relief Schedule—instead of the Sixteenth Schedule. The hon. Member for Gloucester (Mr. Diamond) asked what I thought was a slightly sarcastic question—whether these reliefs operate immediately once this Finance Bill becomes law. Of course, they will not. The hon. Gentleman knew that when he asked the question, as I did.
In regard to other countries with which we have double taxation agreements, it will mean renegotiating the whole of those double taxation agreements. My hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) suggested that we shall not necessarily be in a very strong position in the course of negotiations, and that we may well lose some of the benefits and advantages that are incorporated in existing double taxation agreements. That may well be, but what is certainly the case is that it will be only after months and very probably years of negotiations that new double taxation agreements are reached. For these reasons, I strongly support the view that the proper way to have dealt with this concession would have been through the unilateral and not the double taxation relief.
There is another point which I wonder may have escaped the notice of my right hon. and learned Friend the Chancellor. The first of all the taxation agreements which were entered into by this country

with another country was made in 1926, when we entered into a taxation agreement—not a double taxation agreement—with Eire, the free part of Ireland. That is not a double taxation agreement. A special provision is that where a company is operating in Eire, but is managed and controlled here, no Eire taxation shall be levied in respect of the profits made, but the profits made there shall be subject to United Kingdom taxation only.
As I think most hon. Members will agree, that is an excellent form of taxation agreement, and one which we should like to see much more widely spread in the context of this Clause. It has the rather remarkable result that, as there is no taxation payable in Eire, there is no taxation in respect of which pioneer relief can be used. This is not a hypothetical case, but a practical case of what is happening at the moment. In respect of the Shannon Development Scheme, the Eire Government has arranged pioneer reliefs which accrue to the benefit of the companies taking part in that very large undertaking, if they are not managed and controlled in this country.
By the Clause as drafted, therefore, United Kingdom companies will be at a tax disadvantage as compared with their competitors from all over the world who fought for part of the contract for this great work.
I wonder whether that point has been overlooked by my right hon. and learned Friend, or, alternatively, if he was fully seized of it, and, for some reason, decided not so to amend the Clause as to bring the pioneer relief in Eire within the ambit of the Clause. Whichever way it is, I should be very glad to hear what my right hon. and learned Friend the Solicitor-General has to say on that point.

Mr. Stanley R. McMaster: I am sure that my hon. Friend does not want to mislead any hon. Members of the Committee, but he did refer to Eire as the free part of Ireland. I hope that he will withdraw that comment.

Mr. Stevens: I unreservedly withdraw, and regret my slip of the tongue.

Mr. Bruce Millan: I think that the points made by


my hon. and learned Friend the Member for Kettering (Mr. Mitchison) were very valid ones, and that what the hon. Member for Portsmouth, Langstone (Mr. Stevens) said about Eire emphasised one of the points which my hon. and learned Friend raised, for this is a question about which we need to be a little clearer. Many countries are likely to be involved in this matter, because we have double taxation agreements with a great many countries which cannot, by any stretch of the imagination, be called underdeveloped, because they include the United States of America and Canada.
There are a number of other European countries. They are not underdeveloped countries, although in his opening remarks the Solicitor-General talked exclusively of under-developed countries. The hon. Member for Lang-stone gave the example of Eire, which is giving certain taxation reliefs. Again, Eire is not the kind of under-developed country about which the Solicitor-General was speaking.
Let us suppose that one of the other countries with whom we have a double taxation relief arrangement—a country of a similar character to Eire—were to introduce some sort of tax relief or holiday. Would it be the intention of the Government to make special provisions in the double taxation arrangements to provide for that taxation holiday? If that is the intention of the Government it goes far beyond what the Solicitor-General said in his opening remarks. It seems clear from what has been said that this is an enabling Clause. It is not a question of applying the existing double taxation agreements indiscriminately.
There is also the question of timing. The hon. Member for Langstone raised that question, and in that connection the Solicitor-General may say something about subsection (4). As far as I can see, that has a retrospective effect. I should like the Solicitor-General to explain exactly what retrospection it has. Is it retrospective from the time at which the agreement was signed, or adjusted, to the time of the passing of this Finance Bill, or it is retrospective even further back than that? We ought to be clear about that. The point made by the hon. Member for Langstone is probably covered, but I am not sure that some of

my hon. Friends would like the retrospective effect to go back beyond the passing of the Finance Bill.

Mr. Anthony Crosland: As this debate is on the Clause as a whole, as well as on the Amendment, our remarks may be of a more general character. Linking up with what my hon. Friend the Member for Glasgow, Craigton (Mr. Millan) said, it is the object of this Clause, by providing this relief, to encourage investment for purposes of development in other countries. To the extent that this will operate solely with what are commonly called under-developed countries I am completely in sympathy with it, but for the reason given by my hon. Friend—that it may have the effect of encouraging indiscriminate overseas investment—I feel very unhappy about the whole trend.
I take the view, which many others take—possibly including hon. Members opposite—that in the last two years we have been investing overseas more than our balance of payments will stand. If we go on as we are now, I do not see any prospect of bringing to an end the situation in which our total commitments overseas every year exceed our surplus on current account in the balance of payments. Therefore, any Chancellor in this situation must look very warily at the total amount of our overseas investment. Many people think that the concessions given over the last decade to the O.T.C. have been very much too large, and have had a bad effect on our balance of payments, which has outweighed any good effects. I want to strike only this one brief slightly discordant note, to the extent that the Clause might have the effect of increasing indiscriminate overseas investment on a scale which our balance of payments certainly cannot support.

4.45 p.m.

The Solicitor-General: I am grateful to the Committee for the way in which it has received the Amendment and the Clause. In answer to the point made by the hon. Member for Cardiff, South-East (Mr. Callaghan), the C.D.C. and its use is not a matter for me, but I will see that the hon. Member's remarks are drawn to the attention of the appropriate Ministers.
As the hon. Member recognises, the Clause is a comparatively narrow one, but it is useful. Its purpose, which I know to be the purpose that the hon. Member has at heart, is to prevent development in underdeveloped countries being stultified by the operation of our fiscal laws. Secondly, the Clause is capable of being operated for countries outside the Commonwealth. It is not limited to Commonwealth countries, although I have no doubt that they will have a special claim to our consideration.
I turn to the general operation of the Clause and the question asked me by the hon. and learned Member for Kettering (Mr. Mitchison). Broadly speaking, he is right in saying that the purpose of the Clause is to ensure that the income remitted to this country which is represented by the tax spared in the foreign country should escape tax in this country as it has already in the foreign country. This is an enabling Clause. It does not operate immediately. It enables this country to do what it cannot do under the existing law, namely, negotiate double taxation agreements which will prevent frustration of the tax reliefs in the foreign countries.
The hon. Member for Glasgow, Craigton (Mr. Millan) and my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens) asked me how far it was intended to go. It is in very wide terms, and each case will be decided on its merits. But it is part of the machinery of double taxation agreements that they have to be brought before the House of Commons and approved by affirmative Resolution. The House will be able to control the negotiation of the agreements. By and large, it is intended to use the sort of reliefs which the Clause will enable to be negotiated in special cases to which they are peculiarly appropriate.
The hon. and learned Member for Kettering asked whether we had any particular case in mind. We have. We have already negotiated a double taxation agreement with Pakistan which gives effect to matters which we have been discussing with that country. Pakistan denounced the previous double taxation agreement that we had with her, mainly because we were frustrating precisely this type of relief, but she invited us to renegotiate a double taxation agreement. That has been done,

and a draft is available in the Vote Office. Having negotiated such an agreement, we are constitutionally bound to pass legislation, if the House of Commons thinks fit, to enable effect to be given to it; and if the Clause is passed the agreement will, in due course, be brought before the House for its scrutiny.
That brings me to the point about retrospection, asked by the hon. Member for Gloucester (Mr. Diamond) and answered by the hon. Member for Craigton. If hon. Members will look at subsection (4) they will see that there need not be any delay of the kind to which the hon. Member for Gloucester referred, because retrospective effect can be given. That is especially relevant to a case like Pakistan, where we would otherwise have a gap between the termination of the previous agreement and the coming into force of the new one. Subsection (4) enables the agreement to operate retrospectively so that there is no interim period.

Mr. Mitchison: The Solicitor-General has used the word "may". Am I to understand that it is permissive, or is it definite?

The Solicitor-General: The whole Clause is permissive. Subsection (4) has the effect that we are enabled to negotiate a double taxation agreement implementing this Clause with retrospective effect. The Pakistan agreement contains such a provision, and it will come before the House for approval.

Mr. Millan: What the Solicitor-General said about Pakistan is reasonable. One does not want to have an interval, but if an agreement is subsequently negotiated with another country, will the retrospection apply to the date of the passing of the Act, or will it go further back?

The Solicitor-General: The Clause enables one to go further back. I cannot answer that question more specifically. It must depend on the circumstances of each agreement. At any rate, it is necessary in the only case where we have entered into renegotiation, namely, Pakistan.
My hon. Friend the Member for Middleton and Prestwich (Sir J. Barlow) and my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor Goldsmid)


raised a technical point which I will look into before we come to Report. My view is that the Amendment, and indeed the Clause, operate in the way we intend, but I will look into that point. However, I should make it plain that the grossing-up operation which I described does not take place under this Clause at all, but under the existing law. I think that it operates to produce the right result. However, I will look into that again.
The hon. and learned Member for Kettering asked what was the cost of this Clause. I think that it will be apparent from the observations I made that I cannot answer that, because it depends on each agreement which is negotiated and brought before the House of Commons; but as each agreement is negotiated and brought before the House it may be possible to give an estimate of the cost of it.

Mr. Mitchison: Surely the Government have some idea of the amount of money they propose to allow by this fiscal concession? I am not critical of its purpose, but I should have thought that it was the most ordinary housekeeping wisdom to have an idea of how much was going to be allowed.

The Solicitor-General: It is not until the agreement is negotiated and the concessions which are given in return for our concessions are negotiated that one can possibly tell what the net cost will be. It all depends on the terms of each agreement.

Mr. Mitchison: Does that mean that the Government have no idea of the prospective cost of this? Have they made no estimate at all?

The Solicitor-General: It will be entirely under the control of the Government in the circumstances of each case.

Mr. Mitchison: Under the control of Parliament?

The Solicitor-General: Under the control of Parliament, in the way that I have described, because no agreement can come into force until it has been approved by the House of Commons.

Mr. William Ross: The Solicitor-General said that there is a draft agreement in relation to Pakistan.

What is the estimated cost of that agreement?

The Solicitor-General: I do not think that I can answer that question without notice. It means comparing it with the operation of the previous agreement and the counterbalance of the mutual concessions, but I will see whether an answer can be obtained in respect of the Pakistan agreement. An attempt will be made to assess it and, if possible, the House will be informed when the affirmative Resolution comes before the House.
The question of cost brings me to the point to which a number of hon. Members referred, namely, why does the Clause not extend to unilateral relief? I suppose the short answer is that it could not do so because it would be outside the Ways and Means Resolution, which covers only the bilateral reliefs. But the answer was given by the hon. Member for Grimsby (Mr. Crosland) in his intervention, namely, that this might be a costly matter. At any rate, it is a matter which one ought to keep under review and under control. If we are giving this concession, it is valuable to make sure that it fits into a proper agreement in which reasonable concessions are made from the other side.
Secondly, all these reliefs mean that there is some infringement of a principle which the House has shown itself to be jealous about, namely, that people in this country should not, so far as we can see to it, enjoy income which has not borne any tax anywhere. We are prepared to see a breach of that principle in particular cases, of which the development of underdeveloped countries is one, but it is not one to be used indiscriminately. For those two reasons, as well as the procedural reason, advisedly the Clause did not extend to unilateral relief.
Two technical questions were asked. The hon. Member for Gloucester asked whether the Amendment was really necessary. I am satisfied that it is. I might take as an example paragraph 8 (2) of the Sixteenth Schedule which says that the amount received in the United Kingdom
shall be treated as increased by the amount of the credit allowable against income tax.
What we are making allowable against Income Tax is the notional sum, in other words, the tax spared. Unless we have


the Amendment as I have described it, it will mean an adding back of a notional amount which had never been received. For that reason it is necessary.
The hon. and learned Member for Kettering's final question was purely on the drafting. He asked how the section could increase any amount of income. The answer is that the section, combined with the Sixteenth Schedule, operates to increase, in the eyes of the law, the amount of the income received in the United Kingdom in the way that I described. The Amendment is necessary, and I commend it and the Clause to the Committee.

Sir Derek Walker-Smith: Before my right hon. and learned Friend sits down, will he be good enough to add to his very lucid exposition of this complex matter a clarification of one point on which I might conceivably not be the only hon. Member in the Committee to be in some doubt?
My right hon. and learned Friend referred more than once to the permissive nature of the Clause. It is permissive in the sense that any double taxation relief arrangements under Section 347 of the Income Tax Act have to be initiated by the Government and then approved by Parliament. But, once a double taxation arrangement has been initiated and brought to fruition under Section 347, is it right that this principle is then mandatory in the sense that it must apply in any such arrangement? That would seem to be so because the Clause says:
…shall be treated as having been payable…".
Is that the right construction?

5.0 p.m.

The Solicitor-General: Perhaps it would be to the convenience of the Committee if I answered that right away. In spite of the mandatory drafting of the Clause it is permissive, because the principal section—Section 347—gives a wide discretion to the Government in negotiating double taxation agreements as to the terms which may be included. Therefore, it is purely a matter of the discretion of the Government whether they extend to any country the concession which the Clause operates. I think that the matter will be made plain if hon. Members care to look at the

Pakistan agreement and see how it is phrased there.

Mr. Stevens: Before my right hon. and learned Friend sits down again, could he say something about the special position arising from the special provisions of the taxation agreement with Eire?

Mr. Callaghan: To save the right hon. and learned Gentleman sitting down for a third time, may I now press him a little more on the point raised by my hon. Friend the Member for Grimsby (Mr. Crosland)? All who have watched the development of the under-developed territories have been conscious of the fact that capital seems to flow to the more developed parts of those territories. It is easier to get capital in Australia than it is in Uganda.
I fully realise that double taxation has to be negotiated, as has been said by the hon. Baronet the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), but I would say that here is a way in which we could use taxation as a discriminatory weapon—if "weapon" is the right word—to guide investments in a particular direction in which we would like it to go for political reasons or, indeed, for social or economic reasons.
As the rubric of the Clause runs and, indeed, as subsection (2) runs, it would obviously be possible to give this relief for the purpose of promoting development in a territory whether it were developed or not in the conventional sense. I think that there must be a measure of discrimination to the Government in the matter, but it would be helpful if the Solicitor-General could give the Committee an assurance that when double taxation agreements are brought forward this particular relief will be drawn to the attention of the House.
When we are being asked to approve such an agreement, we should know whether, in fact, the specific basis on which the right hon. and learned Gentleman recommended the Clause and the Amendment, namely, that it is for the purpose of helping the under-developed territories, is being fulfilled. A Minister's assurances may be forgotten with the lapse of time, but words written into the rubric and into the Statute will persist. If we were given the assurance that the House would be allowed to make sure that the relief is being given for the purposes for which the Government


designed it, that might be a reminder to those framing such agreements that it must be the decision of the House.

Mr. Diamond: Now that the right hon. and learned Solicitor-General is firmly sitting down, I wonder whether I may take up a point very closely allied to what my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) has just said. But, prior to doing that, I hope that I may be allowed to thank the right hon. and learned Gentleman for having been so courteous in replying to every point which has been made. He is aware, of course, of the fact that we are all trying to do the best we can with the Clause.
I think that we should all be able to understand it a little better had the debate taken its normal form and had the right hon. and learned Gentleman given not only the background remarks relative to the Amendment, but also the background remarks relative to the Clause. He would then have covered many of the points which have been elucidated by question and answer and would have saved himself a little trouble.

Mr. Ross: The right hon. and learned Gentleman said that that was what he was doing.

Mr. Diamond: I am not quite sure whether I understand the right hon. and learned Gentleman accurately, but he seems to be saying that there is a complete correlation between those countries where it is appropriate on economic and humanitarian grounds to enter into agreements of this kind and those countries where double taxation agreements exist.
Let me amplify that, if I may. If there is not correlation, then I think that the point which I put still remains not fully answered. The Committee is, I think, generally taking the view that this is a wise provisoin provided, of course, that the benefit is directed in the most helpful way to countries which are truly in need of industrial, commercial, scientific and other developments.
The right hon. and learned Gentleman has said that this Clause takes the form of giving relief under double taxation agreements but not under unilateral agreements because we cannot afford the

amount under unilateral agreements. Does it necessarily follow that under all double taxation agreements the Government will be able to give help wherever it is needed? Is it the case—I do not know—that there is not a single country which we would wish to help which is not the subject of a double taxation agreement?
Otherwise, the Government are being denied the right, which they might wish to exercise, of giving encouragement under the Clause to a certain country because there is no double taxation agreement with that country and, therefore, are unable to negotiate with that country which they might wish to help or to give it help by way of unilateral relief. Therefore, are the Government satisfied that they have taken sufficient powers under the Clause to do the things that we want to do?
Allied to that, I want to take up further the point about the cost. I can understand there being no reference to the cost of agreements which have not yet been negotiated, but I cannot understand a Money Resolution and a Financial Statement which leave out of account any financial results from this Clause, although what the Clause proposes is mentioned earlier in the same Financial Statement as one of the things which the Chancellor proposes to do. I cannot understand there being no information available with regard to costs as far as we are committed at the moment. I have not the Money Resolution, and I do not suppose that it is mentioned there.
Surely the Government should give us a little information on this matter so as to enable us to see where we stand. Perhaps the Government will go a little further and say specifically with which countries they have in mind opening negotiations on these lines.

The Solicitor-General: I am very glad to answer the remaining questions that have been asked. The hon. Member for Cardiff, South-East (Mr. Callaghan) is quite right, of course, when he says that subsection (2) is drawn in very wide terms. That is done intentionally. Although I do not want to commit the Government in any way, by and large the relief that is allowed to be negotiated in the double taxation agreements under


this Clause will be negotiated in agreements to which it is appropriate. In other words, there must be a proper case, it seems to my right hon. and learned Friend, for a pioneer relief before we will regard it as a matter which demands concession in a double taxation agreement.
That leads me to the question which has just been asked by the hon. Member for Gloucester (Mr. Diamond). In the first place, it would only be appropriate to countries which give tax holidays or the like. Secondly, we regard it as valuable as a negotiating point in order to encourage the negotiation of double taxation agreements—in other words, to be fitted into a generally satisfactory agreement whereby the end result is fair, looking at the different circumstances of both this country and the foreign country.
The hon. Member for Gloucester, too, asked about cost. I have asked about the cost of the Pakistan agreement and I have been told that it is very small, but my right hon. and learned Friend will see whether a more specific answer can be given when the matter comes before the House. The hon. Member said that he ought to have been told the cost as far as we are committed at the moment. The answer is that we did not give the cost because we are not committed at all at the moment. All that happens at this stage is that the agreement is initialled, but it has no efficacy until it has been approved by the House.
The hon. Member for Cardiff, South-East asked that when these agreements came before the House attention should specifically be drawn to this relief. I will see that his request is noted in the proper place. I have not dealt with the question of my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens) about Ireland. He is quite right; Ireland is a unique case. But from the purely fiscal aspect I point out that we cannot be expected to give credit for purposes of United Kingdom tax in respect of tax which Ireland would have given up if the United Kingdom company had been, liable to Irish tax.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clause 15.—(DOUBLE TAXATION RELIEF: PROVISIONS AS TO COMMENCEMENT OF TRADE OR SOURCE OF INCOME.)

Sir H. d'Avigdor-Goldsmid: I beg to move, in page 11, line 33, at the end to insert:
Provided that if the person chargeable proves that the income tax payable for all years of assessment in respect of the same source exceeds the tax which would have been paid if the income tax had been assessed throughout on the basis of the income arising in the year preceding the year of assessment, then the tax so chargeable shall be reduced by the amount of the excess.
This is a very long Clause dealing with one of the complications of tax law which arise from the commencement of a new industry and the varying choice of the taxpayer in his year of assessment. I will not detain the Committee long, because I have learned in my short experience that it is an impossibility for back-bench Members to put down a form of words which is acceptable to a Parliamentary draftsman. I therefore thought that it would save time if I did not put down a form of words which expressed my meaning, conscious that, in any event, it would not be acceptable to Parliamentary draftsmen. Instead I have put down a form of words to provide a peg in order that I may propound the idea.
Under these various forms of assessment the effect of Clause 15, and particularly subsection (5), is to work fairly if the overseas income is steady or even growing but to work unfairly if the overseas income is diminishing. The object of the Amendment is to provide that where, owing to a variation in the basic years of assessment, a firm trading overseas finds that it has to pay more tax than it would have paid if it had paid tax on the normal English basis—the previous year of operation—the firm may appeal and claim that it should not be liable for more tax than it would have paid had it paid tax on the previous year's basis.
I am certain that no form of words which I could have devised would have been acceptable, but I hope that the idea is acceptable to my right hon. and learned Friend that he will consider it.

5.15 p.m.

The Solicitor-General: I can tell my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) that I have no drafting objections to the Amendment. On the contrary, my objection is on a matter of principle and fiscal equity. The Clause is designed to rectify anomalies which have arisen under double taxation agreements by reason of the commencement and ending rules, but particularly the commencement rules, under Schedule D. The liability under Schedule D is normally based on the income of the preceding year, but in the early years of the commencement of a business and in the last years of a source of income the current-year basis applies.
In addition, there are occasions in the commencing years on which the income earned in one accounting period can form the basis of assessment not only for that and the subsequent year, but also for the year before that—If, for example, the business starts half-way through an accounting period, in the half-year or whatever the fraction is.
The present law operates anomalously, in that the foreign tax in respect of that source of income can be used once only as a credit. Thus, if one has income arising in one accounting period, but used as the basis of assessment for, say, two-and-a-half years of assessment, the foreign credit can be used only against one of them, and that has led to an anomalous result.
The Clause is concerned to mitigate that effect. The general effect is to provide that where the profits of any period are assessed to United Kingdom tax more than once, the credit for the overseas tax paid on those profits will be available to a corresponding extent; and when the source of income comes to an end there will be a review of all the amount of credit which has been given during the life of the source in order to ensure that an excessive credit is not given. In effect it is that review which is covered in subsection (5).
May I give an example in order that the Committee may see the way in which it works? Let us take an example in which the income arising in the commencing year is assessed to United Kingdom tax two-and-a-half times in the circumstances which I have just described and to overseas tax once. Let

us say that the overseas tax on that source of income is £1,000. Under the Clause, particularly subsection (3), the total credit for this tax allowed against United Kingdom tax will be £2,500, which is two-and-a-half times the £1,000 of the overseas tax. When the source comes to an end subsection (5) applies. This deals with the question of the overseas tax which does not rank for credit because it relates to a non-basis period, a period which because of the cessation provisions does not form the basis of any United Kingdom assessment. Let us say that that is £1,200.
Under subsection (5) an assessment is then made on this basis. We get, first, the credit given in this country £2,500, foreign tax paid £1,000, foreign tax which relates to a non-basis period for which credit has not then been given, £1,200—making £2,200 foreign tax paid. The credit given in this country is £2,500 so, on the face of it, there is an over-credit of £300. Subsection (5) says that a Case VI Schedule D assessment may be made to cover the excess credit of £300. I think that the Committee will see that the end result is a fair one. It ensures that an excessive credit has not been given.
What the Amendment does is to propose a proviso that if the person chargeable proves that the Income Tax payable for all the years in respect of the sums in question exceeds the tax which would have been paid if the Income Tax had been assessed throughout on a preceding-year basis, the tax chargeable should be reduced by the amount of the excess.
As my hon. Friend the Member for Walsall, South said, in support of that it may well be that where there is a declining business there is an over-assessment to tax compared with what there would be if we operated throughout on a previous-year basis. It is not correct, as he said, that the normal method of computation is a preceding-year basis. That is generally true, but it is not true of the commencing years and not true of the cessation year. I point out that this Clause is not concerned with the effect of the commencing and ceasing rules of Schedule D as such. This is merely remedying a double taxation anomaly which can result from them. It is directed simply to ensuring that total double taxation relief will be


appropriately limited if necessary so as not to exceed the total foreign tax.
The sort of grievance to which my hon. Friend drew attention can occur just as much if the source of income arises in this country as it does if it arises abroad. Therefore, it is a major objection to this Amendment that it seeks to use a double taxation relief to substitute for the existing basis of assessment a dual basis—the present one and, at the option of the taxpayer, a preceding-year basis throughout if that is more favourable.
It seems quite illogical to try to correct the position in the very limited class of case with which we are concerned under Clause 15. If one is to amend the basis of computation, the basis of assessment, it is very difficult to say why it could not operate both ways; why it should only operate when it advantages the taxpayer—in other words, why the taxpayer, if he pays less tax than he would if he were assessed on a preceding-year basis, should not be made to pay more tax. For those two reasons, that this goes right outside the scope of the Clause and amends the general basis of computing tax for Schedule D purposes, and that it is one-sided, I cannot recommend the Committee to accept the Amendment.

Mr. Geoffrey Hirst: This is very complicated. Did I understand my right hon. and learned Friend to say that there is no benefit from the commencing-years under Clause 15? He said that there was no benefit in the case of those companies under Clause 15 in the commencing-years, unless I misunderstood him.

The Solicitor-General: I must have put it badly. Clause 15 is necessary for the reason that in the commencing-years under Schedule D the income in one accounting period can be used as the basis of assessment for more than one year. Since the basis under existing law is allowable against one of those periods only, it means that when there is the two-and-a-half years basis on one year's profits only one year of those two-and-a-half years gets the benefit of these foreign credits.

Mr. Millan: I agree with the Solicitor-General that it would not be proper for the Amendment—which is a very wide-ranging one—to be accepted on this

Clause, but I think that at least the Amendment has drawn attention to what some of us consider to be a rather serious fault: the method of assessment on a previous-year basis, particularly in view of the complications that gives in the years of commencing and in the years of cessation. I think it perfectly legitimate to point out that if we had a taxation system which provided that the year of income should also be the year of assessment the complicated provisions in the Income Tax Acts and the additional complications in Clause 15 would not be necessary.
If I understand correctly, there has emerged in Clause 15, under subsection (5), a rather unusual principle and one which does not apply in the case of the ordinary United Kingdom taxation for commencing and cessation years. The United Kingdom position is that in the commencing years of the business, roughly speaking one year comes in twice to get on to the preceding-year basis. When the cessation basis is reached one year is dropped out so that there is a tax burden which approximates to the burden as it would have been calculated on an actual year basis on the total income over the period.
It is, of course, true that when there is an income which is rising over the years the taxpayer, on the whole, gains, because the double year at the beginning probably includes an income which may be substantially less than that of the year which is dropped out at the end under the cessation provisions. One of the fundamental faults of the case put by the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) in favour of the Amendment, was that he was simply basing his case on a declining income where there could be injustice, but it is equally true, and probably more common—just as common anyway—that if there is an increasing income the taxpayer benefits. So, an Amendment like this does not meet the basic situation, which I repeat—I do not want to go into details—could be met if we had a different basis of assessment based on actual income and not on the preceding-year.
Subsection (5) is an attempt to make an adjustment which will bring the taxpayer's position over the whole period from the commencement to the cessation into proper balance. It seems to me that there will be certain practical difficulties.


One must not regard commencement and discontinuance as being necessarily over a period of a few years. It could be a period of fifty years, or perhaps even longer, and it is rather artificial to make this adjustment at the cessation, which may be fifty years from the commencement, in entirely different circumstances, when in any case the value of money is likely to be quite different from what it was at the beginning. It is a very odd sort of arrangement that we should be making this complicated provision to give that foreign taxation a theoretical balance, which in any case we do not have in the very much more important United Kingdom taxation, and where the theoretical balance may give a result which is more unjust than it would have been if we had simply allowed the foreign taxation to be treated on a basis similar to that of United Kingdom taxation.
5.30 p.m.
I wonder whether the Solicitor-General can say something about this matter. It is not terribly important, because the number of cases under subsection (5) for long periods will not be very great, although I imagine that it might operate over short periods where a company has an enterprise abroad and has to close it down in a short number of years because it does not turn out as successfully as was hoped.
We are entitled to a rather better explanation about why the Government have felt it necessary to have this provision in respect of foreign taxation when there is not a similar provision for United Kingdom taxation. As regards the latter, the Inland Revenue has discretionary power over the penultimate year of assessment. For foreign taxation, why should the Inland Revenue not have a similar discretion if the Government want to protect themselves in this respect?

Mr. A. E. Cooper: I have nothing to say about the merits or deficiencies of the Amendment, but at this stage in the Finance Bill last year I was forced to make a protest in the strongest possible terms about the near impossibility of the man in the street understanding this type of Clause, and after the protests of last year, by myself and by other hon. Members, I had hopes

that in this Finance Bill we would have had provisions which were understandable by the man in the street.
Much of the tax evasion and tax avoidance in this country is largely the result of complicated Finance Bills which govern our Income Tax law. This year the Chancellor had a great opportunity—

The Deputy-Chairman (Major Sir William Anstruther-Gray): I wonder whether the hon. Member's remarks would not be more appropriate on the Motion "That the Clause stand part of the Bill" when we come to it.

Mr. Cooper: Since I find it very difficult even to understand the Clause, it is probably just as well that I have spoken now. I have made my protest and that is all I want to say.

Mr. Diamond: When I made some comments earlier this afternoon and then resumed my seat, my hon. Friend the Member for Glasgow, Craigton (Mr. Millan) told me that I had made his speech for him. I now reciprocate by saying that he has just made my speech for me, but what he said is worth saying at least twice because what he has said is born of knowledge and a good Socialist approach to wealth and to economic and fiscal affairs and I fully share his views. We are very grateful to the hon. Member for Ilford, South (Mr. Cooper) for what he has said most relevantly on this Amendment.
I entirely agree that the Amendment cannot be accepted, although I have the greatest sympathy with what it seeks to do. The difficulty of the hon. Member for Shipley (Mr. Hirst) and that of the hon. Member for Ilford, South and that of other hon. Members is that this Clause stems from one thing and one thing only—the fact that the Government have obstinately resisted the good advice, proffered from most authoritative quarters, that they should change the rules of Schedule D certainly for companies, switching from the present anomalous rules to a current-year basis.
I am sure that it is as plain as a pikestaff to you, Sir William, but I had better add one or two words for the benefit of hon. Members. The Amendment and the Clause arise only because of the anomalies not in the foreign country but in our own tax structure. The


Solicitor-General referred to two extraordinary oddities. He said that in the opening years of assessment one year's income might well be assessed two-and-a-half times. Who is right and who is wrong? The foreign country assesses the income of one year once, and that seems sensible and entirely right, for it is evidently nonsensical to assess the income at two-and-a-half times the amount, which is how the curious anomaly arises.
The other oddity which he mentioned was that in the closing years of assessment one year's profit was not assessed at all. This again creates an anomaly because the foreign country does not act on this curious, stupid and outmoded basis but values the income on the one year's basis, so that there is one year's profits and one year's tax and one year's tax relief to be set against the tax in that country.
This is a very complicated matter and the drafting is very complicated. That is no criticism of the draftsman, but results because the Government insist on retaining this outmoded form. The Economic Secretary is once again honouring us with his presence. He knows my views about this matter and he is now lending his strength of character to the Government on this issue. We have to solve these problems and rid ourselves of the necessity to have not only this sort of Amendment but the whole Clause—and it is a long Clause to deal with one small point.

The Deputy-Chairman: Order. I am afraid that the hon. Member is tending to drift from the Amendment to a speech which would be more appropriate on the Question "That the Clause stand part of the Bill".

Mr. Diamond: It would be very remiss of me if I did that, Sir William. I am grateful to you for pointing out that I have strayed and I will alter my compass immediately and come on to the Amendment without denying myself the right to draw attention to this situation on the debate on the Question "That the Clause stand part of the Bill".
The Amendment is necessary because of the provisions of subsection (5), which are part of the complications arising from our basis of assessment. Our basis of assessment provides that the opening and closing years shall be dealt with on

anomalous bases instead of on a simple current-year basis. The current-year basis is supported by the Royal Commission. It is supported by the Institute of Chartered Accountants, some of whose members grace the benches on both sides of the Committee. The current-year basis is supported by most knowledgeable thinking people, certainly as concerns limited companies. I am sorry that the hon. Member for Ilford, South has had to submit to so many complications because of the obstinacy of his own Front Bench.

Mr. Hirst: If I cut out most of the adjectives, I agree with the hon. Member for Gloucester (Mr. Diamond) more than usually. As my right hon. and learned Friend will appreciate, if we have paid rather a lot of attention to this and have, up to a point, pressed the Amendment, it is because those of us who are interested in this subject and have contacts with interests of this nature realise how important it is to help companies which find themselves in the position with which the Amendment is designed to deal.
I sometimes think that the perfectly proper and correct attitude of the Inland Revenue in making quite sure that there is no possible deviation from the narrow and respectable paths of tradition inevitably and unfortunately militates against our desires to help those companies, particularly those overseas companies, for which other countries do much more in the fiscal and financial fields than we do.
I have one example, which is extremely difficult and which would be helped by the Amendment, which my right hon. and learned Friend cannot accept. As I can state it shortly, I will mention it in order to learn whether the Solicitor-General can find a method of assisting the companies. If my right hon. and learned Friend cannot answer me now, perhaps he will write to me after the Committee stage has ended. It is the case of two companies of similar background which both have an income from a foreign source constant for the first five years at £1 million per annum. In one case the income for the last five years rises to a constant figure of £2 million, and in the other the income for the last five years is nil.
In the first case the taxpayer, as I understand it, can obtain the benefit of Clause 15 in the commencing years and when the source ceases he not only obtains an advantage from the basis of assessment in the United Kingdom because £2 million drop out of assessment in the non-basis period compared with only £1 million doubly assessed in the early years, but he is allowed to keep his Clause 15 relief intact because no Case VI assessment will arise under the formula in subsection (5).
In the second case, the taxpayer not only obtains no advantage from the basis of assessment on cessation, thus being with a double assessment on £1 million in the commencing years which is completely uncompensated, but he also has the Clause 15 relief withdrawn because under the formula in subsection (5) he will be entitled only to the credit which would have been allowed apart from the Clause.
As my hon. Friend the Member for Ilford, South (Mr. Cooper) will undoubtedly agree, that is just about as complicated as the Clause. Those two companies, which operate side by side and have a substantial financial difference in result, are hit absolutely right over the fence by the operation of the Clause as it stands.
The Amendment was drafted to meet such a case. I gather that the Amendment is ineffective. Before we part with the Bill I should like to feel that, whether in the Bill, in other Measures, or in the intentions of the Treasury, such a case is intended to be met.

5.45 p.m.

The Solicitor-General: I am very grateful to my hon. Friend the Member for Shipley (Mr. Hirst) for not demanding an immediate view of the two cases he mentioned. I will gladly avail myself of his kind invitation to write to him about them. However, I can say to him from what I have heard so far that I cannot see that the two cases, and such anomalies as they present, would be any different whether the income arose from abroad or whether it arose in this country, and whether there was a question of double taxation or no double taxation. That is my objection to the Amendment, namely that it treats differently and more favourably income

which arises from abroad and is assessed to tax under Schedule D.
My hon. Friend the Member for Ilford, South (Mr. Cooper) took the opportunity afforded by the Amendment to lecture us on the complexity of this provision. I know that it is no comfort to him, but I said last year that I have every sympathy with his viewpoint. As I pointed out last year, it is to some extent inherent in the nature of our tax law.
The Royal Commission says this in paragraph 1089:
We accept that there are several valid reasons why income tax legislation should be difficult and obscure. Not infrequently its conceptions represent an attempt to dress what are really mathematical formulae in the vesture of English prose.
That applies particularly to a Clause like this. The Commission goes on to say:
It has established its own jargon and perhaps does well to stick to it.
There is one other reason, which I did not mention when I answered last year, why we have a great complication in our tax code. It is that we pay scrupulous regard to rectifying in the interests of the taxpayer any small burden in the most obscure circumstances which might be thrown on him by a general provision. That inevitably causes a very considerable complication. The case raised by hon. Members last year was an outstanding example, but this, too, is not a bad example. What we are doing is to try to correct an anomaly, not so remote as the case which arose last year, but still not a usual one. It involves considerable complication.
The hon. Member for Glasgow, Craigton (Mr. Millan), in one of his very lucid speeches, and the hon. Member for Gloucester (Mr. Diamond), in one of his very forceful speeches, said that we would not be troubled by the Clause at all if we accepted the recommendation of the Royal Commission and went from the previous-year basis of assessment under Schedule D to the current-year basis. That is absolutely true. We should not be troubled with this Clause, but I think that we should be troubled with twenty Clauses of a complexity which would drive my hon. Friend the Member for Ilford, South almost demented. I need hardly say that the Inland Revenue has considered the


matter with the greatest care and has not found any simple way of making the change. It goes much beyond the administrative difficulties and the appalling complexity of the drastic change which would be involved.
It would be extremely costly. I have forgotten the actual figure, but it would be well in excess of £100 million. Does any member of the Committee really think that the best use of the first available £100 million is to go from the basis of assessment under Schedule D—the preceding year—to the current year? I do not believe that anybody does. Therefore, because of that, I shall in due course venture to recommend Clause 15 to the Committee, not, perhaps, as what hon. Members opposite would regard as being the best but, at any rate, as correcting an anomaly which arises under the existing law.

Sir H. d'Avigdor-Goldsmid: At this point, it might be appropriate if I were to thank my right hon. and learned Friend for the attention he has devoted to this point; to say that I am glad to have drawn the Committee's attention to the unfortunate situation of a company which, instead of earning more money, earns less, and then, having done my bit to try to persuade my right hon. and learned Friend to allow a company to escape from having to pay tax on profits it has not earned, to beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Motion made, and Question proposed, That the Clause stand part of the Bill.

Mr. Douglas Houghton: It may be for the convenience of the Committee if I now make one or two brief observations. It will, at least, give my hon. Friends the Members for Gloucester (Mr. Diamond) and Glasgow, Craigton (Mr. Millan) a little time to decide which of them will make the speech of the other. At the same time, it will enable me to get one or two matters off my chest.
This is very heavy stuff, indeed, after an all-night sitting; I confess that my mind was much clearer at a quarter past five this morning than it is now. That underlines very clearly the appeal made by the hon. Member for Ilford, South (Mr. Cooper) for more simplicity in our tax affairs, and more explanation of that which may be complicated. I was

making this plea almost from the very first day that I entered the House twelve years ago. I am very glad that the Solicitor-General is sitting in his place this afternoon, because it was to him more than to any other Minister on the Treasury Bench that I made this appeal for explanations to be circulated with the Bill telling hon. Members what the complicated Clauses were all about.
The right hon. and learned Gentleman did me the courtesy one year of saying that the matter had been very carefully considered but that there were so many difficulties in the way that it had not been found possible to comply with my request. He then proceeded to make an explanatory speech on the Second Reading of the Finance Bill of that year that would have been admirable as a written document of explanation circulated with the Bill itself. This year, as my hon. and learned Friend the Member for Kettering (Mr. Mitchison) has already pointed out, the Second Reading explanations of the Bill skipped these complicated Clauses. We are now grappling with them.
I still think that it should be possible for the Government to circulate an Explanatory Memorandum with the Finance Bill. What is the real difficulty about it? All the safeguarding words can be writen into the document—that it is not necessarily a statement of the law and is circulated for the guidance of hon. Members. The Accountant, Taxation and other technical publications attempt to explain the several Clauses of the Finance Bill so that their readers may understand what is afoot. I believe this is to be one of the most important matters in the conduct of our business in the House, and especially on the Committee stages of Bills as complicated as this.
There sits the Solicitor-General, there sits the Chancellor of the Exchequer, there sits the Economic Secretary—they all have big bundles of briefs from the Inland Revenue telling them exactly what the Clauses do and what the Amendments purport to do. They are saturated with quotations from the speeches made by hon. Members on both sides of the Committee on similar Amendments in previous years. They know it all, but here we are—ignorant.
Why cannot they share this document? Why cannot it be handed across the


Table? Why cannot we be allowed to look at it, so that we may know what is coming, and be in a better position to bring to bear such wits as we possess upon the business of the Committee? I am very serious about this. I will make the threat that if, next year, the Government do not publish an Explanatory Memorandum to the Finance Bill, I shall do it myself. At least we shall try to do something that will facilitate the work of the Committee.
I turn now to the Question "That the Clause stand part of the Bill"—and I apologise, Sir William, for having tried your patience for a few minutes. I do not propose to say very much, except that I agree with my hon. Friend the Member for Gloucester when he says that so much of this could be swept away if we would really come to grips with the basis of assessment under Case 1, Schedule D.
Although we have been told of the difficulties, let me remind the Committee that years ago the basis of assessment under Schedule D was the three-year average. We got rid of that, and went to the preceding year. The basis of assessment under Schedule E was the previous year. We got rid of that, and came to the current year. We introduced P.A.Y.E.—I know at considerable future cost, but at the time there was really no interruption in the flow of revenue. It was merely that, at the end of the road, revenue that would have been due for collection would not be due for collection, but that day will never come because as one generation of taxpayers who would have had an overspill of taxation due at the end of their taxation lives passes out, it is replaced by people who will pay currently, and no such complication arises.
This reform might be worth paying a large sum of revenue to achieve. Some hours of debate were spent last night in dealing with an anomaly in the proposals in Clause 11 because of this very point of assessing Schedule D on the profits or gains of the preceding year. The Chancellor had to take a gruelling for departing from his declared intention of giving the Surtax relief on earned income in the year in which it was earned, this year and in future years because, incidentally, his proposals gave relief to Schedule D taxpayers who are taxed

from the profits of the preceding year. All that time and effort would have been saved and the anomaly would not have been there.
As my hon. Friend the Member for Gloucester pointed out, all this arose, not from any difficulties in any other country but because of problems arising from a basis of assessment that we choose to retain. There is, Sir William, a new Clause on the Notice Paper on the question of the basis of assessment under Schedule D, and I hope that we shall later have an opportunity to go into that fairly thoroughly.
I did not hear the Solicitor-General refer to the Royal Commission's Report in the context of Clause 15, but I assume that this Clause is a somewhat belated action taken on paragraph 744 of the Radcliffe Commission's Report of 1955. What worried me more than a little on seeing Clause 15 was that the implication could be drawn from its appearing now, six years after the Report, that the Government apparently do not intend to do anything about the basis of assessment under Schedule D. If they had that in mind, there was no real need to trouble the House and this Committee with Clause 15. And it is all set out in paragraphs 742 to 744. I assume that the principle underlying Clause 15, from the comment made about it by the Solicitor-General, is carrying out the observations and suggestions of the Royal Commission in the latter part of paragraph 744.
6.0 p.m.
I agree that the Clause is desirable if anomalies are to be avoided under the conditions which the Solicitor-General has described. We are using the income of one year as the basis of assessment for two years, and possibly more than two years, whereas the tax which is payable in other countries is assessed on the year itself—and they have no such queer ways of dealing with commencement and cessation.
I hope that the Solicitor-General will be able to throw a little more light on the Government's intentions about sweeping away this cause of the trouble. A moment ago he cast some rather heavy clouds on that hope, but he is bound to encounter this trouble time and again. Who would have thought that the Chancellor would be in difficulty on


a matter of this kind, in connection with relief from Surtax It took all night to deal with these difficulties—but we did not get rid of any of them by the time we went to breakfast this morning.
This is a shocking waste of Parliamentary time. It shows the weaknesses in the administration of our Income Tax law and it is time that we did something about it. I shall not go further into the question of whether the law on this matter should be made more understandable by the public because I do not entirely agree with the hon. Member for Ilford, South that everything must be written in such a way that it is completely understandable by the man in the street. That may be asking too much. Hon. Members are not men in the street. They are in the House of Commons.
Nevertheless, hon. Members are expected to be able to understand at least something about Acts of Parliament, while the man in the street may not have to look at one in his lifetime. I realise, however, that when it comes to matters of explanation and administration they must be understood by the public. I also appreciate that, on the whole, the man in the street would not be concerned with Clause 15.
These are all matters of degree, and one of the most serious matters in connection with our taxation system is its complexity and the difficulty of getting it across to members of the public. All of us, in our correspondence, get cases where people are seriously inconvenienced, because they cannot rely on their own judgment to interpret the tax laws. Many of them, even those of more than normal intelligence, consider that they cannot work out their own Income Tax affairs. They feel that they should get a qualified accountant and thus the fees paid to hon. Gentlemen opposite, if not to hon. Members on this side of the Committee, represent additional taxation of the citizens, who feel that they cannot themselves cope with their Income Tax affairs—and they pay a sort of Danegeld in order to get righteous treatment of their grievances.

Mr. Diamond: I am glad to see the Chancellor here. He had a difficult time last night and I hope that he is reasonably refreshed and will do me the courtesy of listening to just two points

that I wish sincerely to put to him. I must first apologise to him since he complained about the forcible way in which I made my earlier remarks. I sometimes regard it as my duty to bring grievances forcibly to the notice of the Government.
Sir William, look around the Chamber at the moment. A number of us who have knowledge of general taxation problems and practice are doing what we can to shape a Bill that will affect the lives of practically every citizen in the country for the forthcoming year. And every year, when we discuss the Finance Bill, the Chamber is virtually empty because hon. Members, except those with specialised knowledge of this matter, cannot get the knowledge they need by quickly reading the Clauses of the Bill.
Every hon. Member likes to be able to advise on Clauses and the general purport of Amendments and hon. Members are usually quick to grasp the essence of the matter and make a quick judgment on whether they are for or against it. But because that is not possible in this Bill many hon. Members must endure agonising hours elsewhere—I say elsewhere—because they are unable to appreciate exactly what it is we are discussing. I know that the majority of them would enjoy carrying out their proper function of participating in the debate, if only they had the minimum help that my hon. Friend the Member for Sowerby (Mr. Houghton) has called for.
I share with my hon. Friend the view that I am unable to understand—and this is not made as an Opposition argument—why the Government are not prepared to help hon. Members to carry out their duties on the Finance Bill, when the Government are prepared to help in other matters. There are White Papers galore, accounts galore; we have a pink paper with practically every Order telling us what information is available in the Vote Office to help us with the background, and so on. But on the Finance Bill, although endless material is available without going to excessive trouble or work, it is referred to only shortly, both in the Budget speech and when the Chancellor introduces the Finance Bill. Why cannot this be put on two or three sheets of paper so that hon. Members can have an idea of what it is all about?
Obviously, if a particular Clause is highly technical, hon. Members could merely be told that it is a highly technical matter, but on subjects which are not technical, such as help that is given to Commonwealth countries—which is of extreme importance—a guide could be supplied. It is because matters are couched in technical terms that hon. Members are put off taking part in Finance Bill debates. I hope that the Chancellor will appreciate that what I have said I mean, and I beg him to give consideration to this matter.
The second point I wish to raise with the Chancellor was his desire, immediately upon taking up the Chancellorship, to implement what he referred to in his Budget speech as the "simplification of the tax system". The Chancellor obviously feels strongly about this and I would like to inform him that before he came into the Chamber hon. Members were having a debate based on this Clause and we all agreed that the Clause would not have been necessary had we had a simplified system of assessment of tax for Schedule D.
I beg him to have a fresh, unbiassed, objective look at the possibilities of assessing Schedule D on a current year basis. It needs imagination and determination—and nothing else. I refuse to believe that the Government cannot overcome the obvious administrative difficulties that exist, and I urge the Chancellor to cast his mind back to Schedule E tax and the introduction of P.A.Y.E. He will remember the speeches he made on this subject and the similar appeals which he urged when he was on these benches. When we came to deal with P.A.Y.E. we had exactly the same problem of switching from the previous year to the current year.
We had exactly the same problem in having to face the difficulty of tax which was due and dealing with it on some broad basis. Perhaps the figure was slightly different, but not a penny was really lost. Now, we have P.A.Y.E. working smoothly in every shop, factory and office throughout the country, saving an enormous amount of work and, what is more important, an enormous amount of wear and tear on the nerves of taxpayers and tax collectors and those horrible people to

whom my hon. Friends refer so often, the professional assistants who help to keep the two in sympathetic and understanding touch with one another.
The change could be made quite easily. The recommendations are very strong. If I may say so, I am not at all moved by the arguments which the Solicitor-General used in objecting to it. I recognise that this is not, perhaps, the point at which we could go into the matter in detail, although it is closely relevant to the Question now before the Committee because it is agreed that the Clause would not be here at all if the change were accepted by the Government.
The Solicitor-General said that the first point he made was not the important one. Let us leave it there. His second point related to money. I share the view of my hon. Friend the Member for Sowerby that the argument that there would be a great loss to the Revenue is quite untenable. The Royal Commission considered this aspect and produced its answer. Only imagination and determination are needed to introduce a much desired and workable reform into our system in order to solve all the problems and meet all the difficulties, the loopholes, the dodges and tax avoidance devices still practised because of the opening and closing provisions. It would settle the difficulties of people who do not know what their tax is because they earn their money in one year and the tax is payable eighteen months, two years, or two and a half years later. Under the present system the impact of the tax is not brought, as it should be, as near as possible to the time at which the money is earned. All those useful results would flow from what I suggest. I ask the Chancellor to consider it again.

Mr. Douglas Jay: Despite the formidable complexity of the subject, may I, in support of my hon. Friend the Member for Gloucester (Mr. Diamond), put a very amateurish suggestion to the Solicitor-General? It seems that there is unanimity of expert opinion in favour of making the change to the current year basis, if it is practicable. The Solicitor-General did not seem to contest the desirability of it. Apart from this point that, no doubt, the transition would be complicated, his only real argument was that it would inevitably involve a very large amount of


revenue. He spoke of £100 million. I agree that that is a serious matter, even though the Government were willing to throw away almost as much as that on the Surtax payers yesterday.
Surely the loss of revenue during the transition must depend upon the rates of tax. We are here dealing with Schedule D on companies. While making the transition which, other things being equal, would mean the loss of £100 million, would it not be practicable to make some variation temporarily in, perhaps, the rates of Profits Tax in such a way that, although all the formulae would be altered, the same amount of money would pass from the same taxpayers to the Revenue, which, from this point of view, would be the substance of the matter?
I ask the Solicitor-General to think it over. I no better understand mathematics than I understand this Clause. On the face of it, as a matter of common sense, I should have thought that, if the difficulty were the temporary loss of revenue, it should be possible, at least as to 90 or 95 per cent. of it, to overcome that by an appropriate alteration of the rates of tax.

6.15 p.m.

The Solicitor-General: In replying to the debate on the Amendment, I was goaded into dealing with the question of the transition from the previous year basis to the current year basis in the assessment of company tax under Schedule D. That was not the right time to do it, nor was I the right person.
Very persuasive speeches have been addressed at the appropriate stage, namely, on this Clause, in regard to both issues, the Explanatory Memorandum and the basis of computation. The arguments were advanced in the presence of my right hon. and learned Friend, who is the proper recipient and the best of all recipients, for the advice which was offered. As the Committee has seen, he has been listening attentively.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 16.—(RELIEF ALLOWABLE IN RESPECT OF FOREIGN LOCAL TAXES.)

Mr. Mitchison: I beg to move, in page 12, line 42, to leave out from "country" to "and" in line 45.
The effect of the Clause as a whole, as I understand it, is to remove the ban there has been hitherto on what I shall for the moment call local taxes when they are sought to be set off against British taxation under the arrangements about unilateral taxation. The local taxes in question are mentioned in the passage we are now considering, and they are
payable under the law of a province, state or other part of a country or levied by or on behalf of a municipality or other local body.
For the sake of raising the question we have taken the latter category, local authority taxes, because it is tolerably clear that tax levied by a province or State may have a character very much nearer to that of a tax levied by the central Government. Not long ago, Income Tax used to be levied in Australia partly by the States and partly by the Federal Government.
The effect of this proposal, as I understand it, would be that the local taxes would be available for set-off subject only to the safeguard depending on their character, for to be capable of set-off they must correspond to Profits Tax or Income Tax in the United Kingdom.
This matter was considered by the Royal Commission. I offer my personal and respectful thanks to the right hon. and learned Gentleman for giving us the key and telling us which crib to look at, indicating the right section of the Royal Commission's Repart. It saved people quite a lot of trouble, and it was kind of him to do it. The relevant section is paragraphs 697 to 701, paragraph 701 being the one which embodies the conclusion.
The Amendment follows the recommendations of the Royal Commission and removes the ban I have indicated, leaving the sole test to be the corresponding character of the tax. It is fair to point out at the same time that this was one of the matters on which the minority dissented. Those right hon. and hon. Members who do not carry all the paragraphs in their heads will discover that at paragraph 171.
The real point, in our opinion, must depend on the extreme difficulty of applying the test of "corresponding". Obviously, there are a good many rough analogies between Schedule A or Schedule B Income Tax, on the one hand,


and rates levied by a municipality, on the other. It is hard to say that there is a radical difference between the character of Schedule A tax and rates if one puts aside for the moment, as we are asked to do under this Clause, the body which levies the taxes in question and the use to which the taxes are put. If we get rid of that, we are obviously confronted with a fairly close parallel.
I have been looking at some of the municipal taxes. The results are very curious. I propose to take an instance which the Committee might, at first sight, think was clearly an instance of a tax which did not correspond with income tax on profits tax. I refer to dog tax, which is levied by municipalities in most European countries. It is not done in this country or, apparently, in Japan. I found a very illuminating passage about the dog in his relation to profits in a summary of the Netherlands tax.
I refer to a symposium on Local Government Finance and its Importance for Local Autonomy, published under the auspices of the International Union of Local Authorities at The Hague in 1955. I am told that The Hague is in Holland and, therefore, they ought to know about the Dutch taxes. The answer appears to be given by competent people.
It is stated:
The dog tax originated from an endeavour to keep the number of dogs within reasonable limits.
That is a matter of history.
The act merely stipulates that a lower rate of levy shall be applied for watch-dogs and dogs used for work than for dogs kept as pets, or that no tax at all be levied on the former category.
I invite the attention of the Committee to the fact that we are now in the realm of dogs used for work, dogs which, as it were, are plant for tax purposes—mobile plant, but, nevertheless, plant.
Accordingly, the tax is usually so much per dog.
We are here considering dogs which are used for work.
The document continues:
In some municipalities, however, the tax has assumed something of the character of a consumption tax owing to the fact that the local authority has made the rate dependent on the owner's means (rate based on house or income).

There is a very puzzling tax. At first sight, we might say that it could not possibly correspond to Income Tax or Profits Tax, or to anything to do with them, but when we realise that the dog is a tool of trade and a working dog, and that the rate at which he is charged varies accordingly, it is not so certain. Then we almost immediately get into the difficulty that there are some taxes whose nature is a little doubtful.
I suppose that a company operating in, let us say, Belgium might find itself confronted with one of a very long list of taxes with which I would not wish to bother the Committee. One of them is a rain-spout and drain-grating tax. That might be related to matters of income or regarded purely as a tax in the nature of a peculiar kind of rate.
A whole page of this book is occupied with describing the character of local taxes in Belgium. Throughout the various instances that are given, including the dog tax and the rain-spout and drain-grating tax prevalent in Belgium, there runs the difficulty that the taxes are either on specific things or levied on a particular activity—that is one kind—or they are levied straight on income, sometimes directly by the municipality, sometimes by some sort of allocation from the central Government. I think that that would be covered by the words in the Clause.
Or, yet again, they are real taxes whose nature it is extremely difficult to distinguish. One cannot say whether they correspond to the rates in this country or whether they are in the nature of Schedule A or Schedule B tax. If an undertaking is carried on in one of these countries, it seems to me that that question will arise in the most baffling form and that the answers will be inconsistent and anomalous in different countries.
The existence of the working dog as distinct from the pet dog may not be so well recognised in countries less logical than the Netherlands. I can visualise the Inland Revenue authorities being sadly put to it to distinguish between what does and what does not correspond with Income Tax. I believe that it was for that sort of reason that these local authority taxes were originally excluded from unilateral relief. It was a good practical working arrangement


to exclude them. When the Royal Commission wished to eliminate the distinction and to rely solely on the test of what was and what was not corresponding, I do not believe that it thought out the difference between rates and Schedule A, to take the most obvious instance, or between taxes of local application and those of more national importance.
The Report gives me the impression that the provincial and State taxes were, in some cases, fairly clearly distinguishable in principle from the central Government taxes—as, for instance, in the Australian case that I mentioned. Having done that, the Royal Commission was lured one step further, and it swept away the distinction about municipal taxes and thereby involved itself in a quagmire of niceties and a shifting sand of uncertain functions and uncertain uses. If only it had consulted the invaluable work to which I have referred, or some of the people who contributed to it. We do not want this to happen. If it does happen it will be a matter not merely for the Inland Revenue, but for those who live abroad or have an office abroad. They will be in very great uncertainty about the law.
We tabled the Amendment to elicit the Government's answer which, I suppose, will be that which the Royal Commission gave, namely, if we do this at all we must include the whole lot, because otherwise it will not be worth while. That may be so. The question is: when we have done it, will it be even more workable? The difficulty will be a different one. Will we not have an enormous number of cases in the courts in which the function of dogs and the wealth of their owners in the Netherlands will fall to be considered, and the questions whether it is a real tax or an Income Tax and whether the matter should be decided by English law or by the law of the country involved will be considered and will give rise to difficult distinctions?
I therefore suggest that the Government should give us a very full explanation of why they have chosen at this moment to eliminate a distinction which appears to have worked with municipalities, at any rate, in the past, and should let us know what complaints have been made about it. I appreciate that the provinces and States are on a slightly different footing.

It may be that our Amendment is not quite right and that we should have stood against the Clause as a whole or eliminated some larger category. However, I think that it serves to raise the point, and I hope that it will secure the desired result of eliciting a clear explanation from the Government of what sort of muddle they propose to put is into by this Clause.

6.30 p.m.

The Economic Secretary to the Treasury (Mr. Anthony Barber): The hon. and learned Member for Kettering (Mr. Mitchison) has explained the purpose of the Amendment with his usual clarity and with one or two graphic illustrations. As I think the Committee will now be aware, the purpose of Clause 16 is to extend unilateral relief from double taxation. The existing law, which is contained in Section 348 of the Finance Act, 1952, excludes from relief two categories of tax. The first are taxes levied by a municipality or other local body whether in or outside the Commonwealth. The second are taxes levied by a province, State or other part of a non-Commonwealth territory. Taxes imposed by a province of a Commonwealth country are eligible for relief quite apart from the provisions of the Clause. The Clause as drafted gets rid of both those exclusions.
As the hon. and learned Member for Kettering has made clear, the object of the Amendment is to limit the extension to taxes imposed by non-Commonwealth provinces, States and other parts of the countries concerned and to exclude from unilateral relief taxes imposed by municipalities or other local bodies. In other words, it seeks to preserve the first exclusion which I mentioned: that is to say, the exclusion concerning taxes levied by a municipality or other local body.
The hon. and learned Member has very fairly referred to the Royal Commission's views on this matter and has pointed out that there was some difference of opinion between the majority and the minority Reports. The majority came to the conclusion that the test of recognition for overseas taxes should depend solely on the nature of the tax and not on the status of the authority which imposed or administered it. It is on this basis, as the hon. and learned Member again


rightly said, that the Clause is put forward for the consideration of the Committee.
I do not wish to delay the Committee by reading long passages from the Royal Commission's Report, but I should like to read a few lines at the end of paragraph 701 of the majority Report, which states:
We also recommend that taxes imposed by municipalities should likewise be enabled to go forward for consideration on their merits; for in a case in which the law of an overseas territory permits a municipality to impose a tax that is framed as a charge on profits comparable to the United Kingdom taxation against which credit may be given the central government of the territory must be taken to be resigning in favour of the municipality a part of the field of income and profits taxation.
The minority did not take the same view. The Government consider that the view of the majority is reasonable and should be put into effect in the Clause. There is, however, one thing which I should say about the minority Report, which, I have no doubt, the hon. and learned Gentleman and other hon. Members have available. The minority did not distinguish between taxes which were imposed by a province and those imposed by a municipality. The Amendment seeks only to exclude from relief taxes imposed by a municipality or other local body.
I rather gathered, however, from what the hon. and learned Gentleman said that he was considering the matter from a wider view and that he considered that the same principles would apply to taxes levied by a province or State or other part of a country which was not a member of the Commonwealth, otherwise I find it difficult to appreciate why he has selected for exclusion from the Clause only taxes levied by a municipality or local body.

Mr. Mitchison: I did it in this form because municipal taxes are the clearest case and, of course, it is open to us either to support the Amendment or to vote against the Clause as a whole. Voting against the Clause as a whole would carry out the intentions of the minority Report.

Mr. Barber: While it may well be true that, in general, taxes of one form ox another imposed by a municipality or other local body are further removed

from United Kingdom Income Tax or Profits Tax, I would have thought that it follows therefrom that they are more easily distinguishable from United Kingdom Income Tax and Profits Tax and, therefore, in many cases at least, it would be easier to say that they do not correspond to United Kingdom Income Tax or Profits Tax. I appreciate, however, that the hon. and learned Gentleman may take a different view.
Whether one is considering taxes imposed by a municipality or by a province—these are the two categories in which the hon. and learned Gentleman seeks to make a distinction—if one is considering the nature of the tax, as was recommended by the Royal Commission, both the majority and the minority, I should have thought that it was no more difficult to decide whether a tax imposed by a municipality is a tax corresponding to United Kingdom Income Tax or Profits Tax than it is to decide whether a tax levied by a province or state so corresponds if one is considering solely the nature of the tax. This is the basis on which the Clause is drafted.
There is one way in which I might be able to help the hon. and learned Gentleman. It has been pointed out to me that there was a particular reason why provincial, but not municipal, taxes in Commonwealth countries are allowed under existing law. The reason is a purely historical one. I learn that they were allowable under the old Dominion Income Tax relief system which existed before unilateral relief was introduced. It was not desired that the substitution of the new unilateral relief system should have the effect of disallowing relief on taxes for which relief had previously been given. I hope that what I have said on that point, and I had not appreciated it before it was pointed out to me, may help the hon. and learned Member in making up his mind whether the Amendment should be pressed to a Division.
The hon. and learned Member referred to local taxes and he was literally correct in doing so. The Committee should, however, bear in mind that the Clause does no more than remove the general disqualification which was previously imposed on local taxes. Local taxes are still required to correspond to United Kingdom Income Tax and Profits Tax


and, therefore, there is no question of admitting for unilateral relief a tax imposed by a municipality which is similar in nature to rates in this country.
I hope that the Committee will take the view that to limit the extension of unilateral relief in the way proposed in the Amendment would not be desirable, and perhaps it is not too much to hope that in the light of what I have said and the information which I have been given and which I have passed on for the benefit of the Committee and the hon. and learned Member, on this occasion he will not think it necessary to press his Amendment to a Division.

Mr. Diamond: Will the Economic Secretary explain a little more carefully how he maintains that the Clause carries out the recommendation of the majority Report of the Royal Commission that one should judge by the nature of the tax and not by the body which levies the tax? As the Clause is drawn, it is not a positive, but a negative, approach. It merely states that the taxation shall not be treated as not corresponding merely because of a particular circumstance. Can the hon. Gentleman tell us how this correspondence is ascertained?

The Temporary Chairman (Mr. John Arbuthnot): It seems to me that that would be more in order when discussing the Question "That the Clause stand part of the Bill".

Mr. Mitchison: The Economic Secretary repeated the recommendations and the reasons of the Royal Commission with a felicity of expression which is rare in Blue Books, and I congratulate him upon it. He did not, however, answer, because I had not really put to him, the point from the minority Report that these municipal taxes are, in many cases, not allowable as a charge against income in their own country. I do not wish to develop that now. The hon. Gentleman gave the answer I expected him to give. I do appreciate that there are anomalies likely to continue unless some removal of this sort is made. I hope, therefore, that I may be allowed to study carefully what he said. Meanwhile, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Motion made, and Question proposed, That the Clause stand part of the Bill.

Mr. Julian Ridsdale: I hope that the Chancellor will pay attention to the plea that I wish to put forward now, because it is a plea to help our export trade. When I was in Iran, last summer, I was struck by the fact that our contractors were not on the same basis for taxation as contractors in the United States and Dutch contractors as well.
Local contractors in Iran carrying out contract work are subject to a contractors' tax as provided for in Article 11 of the Iranian income tax law which was effective from 21st March, 1956. In the case of American contractors doing contract work in Iran, the United States Internal Revenue Bureau permits contractors' tax in Iran as eligible for full tax credit in the United States against American tax on the same profits.
It follows that an American contractor, in quoting for contract work in Iran, can afford to ignore entirely the Iranian contractors' tax which he has to incur but which he recovers in full as a credit against the United States tax liability on the same profit. A Dutch contractor is in exactly the same position.

The Temporary Chairman: I think that the hon. Member is getting a little far from the Question "That the Clause stand part of the Bill." This is not in the Clause.

Mr. Ridsdale: I was endeavouring to give details in support of the plea I was putting forward that the Clause should be a means to help our contractors in Iran. I have made the point that the Americans and the Dutch are helped, and I hope that if the substance of the Amendment which I put down—

The Temporary Chairman: Order. On this Question "That the Clause stand part of the Bill", the hon. Member can discuss only what is in the Clause.

Mr. Ridsdale: I will leave it at that, Mr. Arbuthnot, in the hope that my hon. Friends may be able to develop the points that I have made.

Mr. David Price: I am in a slight difficulty in that two Amendments in my name and in the name of my hon. Friends have not been called,


which I regret, because they deal with a major point which, I think, is lacking in the Clause, but I am not certain whether it is lacking, and I want to know from the Treasury Bench whether the drafting of the Clause as it stands will give relief to local taxes, particularly provincial taxes, which are of a capital nature. It is not quite clear. It would seem to me that they probably are not covered, but in view of the fact that certain items which some countries regard as of a capital nature get caught, there is no reason why under our interpretation they should not come under Profits Tax or Income Tax.
I wonder whether my hon. Friend could give me any answer, at a later stage if not today, on whether, for instance, the Quebec tax of a charge of 2 per mille on capital annually would benefit under the relief proposed in this Clause. There is a number of similar provincial taxes in certain countries in which our firms operate. It has been represented to a number of us that this is a burden upon British firms, and if the benefits which were envisaged to flow from Clause 15 are to flow we hope that the interpretation of the Clause will include those taxes of a capital nature.

6.45 p.m.

Mr. Mitchison: I wanted to ask the Economic Secretary a similar sort of question. A perusal of these taxes has led me to the conclusion that those who say that there is no alternative to rates have not looked far enough. There are more alternatives to rates within the covers of this book than any person could invent by himself. A combination of international ingenuity in varying local conditions certainly has some remarkable results.
I, in another form by reference to Turkey, put the question which the hon. Member for Eastleigh (Mr. D. Price), if I understood him rightly, was putting just now. Turkey is not always recognised to be a progressive country, but in this country we say stoutly that though municipalities must pay compensation to the full they should not get betterment. On the other hand, in Turkey there appears to be a tax on the augmented value of property due to municipal public works. I do not know how long it has been going on. It is a

revaluation charge repayable in five instalments, which is on the margin between a capital tax and income tax. It is another of those capital gains about which we hear so much. Is that a tax corresponding to Income Tax, or is it not?
I find, I would say, not only in Turkey but in other countries that they find it much easier than we do to collect betterment from those who are profiting out of increased value of property not attributable to their own efforts.

Mr. Diamond: The difficulty of knowing whether to support the Clause or not is that one does not know to what extent it will open the door undesirably. I accept immediately that it is a difficult problem. The Royal Commission described it excellently by saying:
The range of possibilities varies through an infinity of gradatus and so does the extent to which political sub-divisions of a territory may be expected to exercise taxing power.
We cannot make a general rule. Wherever we draw the line we are likely to be in very considerable difficulty.
I come to the question I was attempting to ask earlier and put it now in a different way. As this Clause is not going to allow of these payments to be treated as taxation but is merely going to stop them being disallowed solely for the reason they are paid as described in the Schedule, what is the net effect expected to be in terms of cost? If the hon. Gentleman has an idea of what this Clause will cost it will give hon. Members some notion of the extent to which the door will be open.
If the door were to be open widely I must say I would reach the conclusion that my hon. and learned Friend the Member for Kettering (Mr. Mitchison) has very nearly reached, that, on the whole, the simpler and more reliable method would be to vote against the Clause, not to have the Clause, which would be to adopt the recommendation of the minority Report. The majority Report, after all, did not say that these payments should be allowed. It merely said regard should be had to the nature of the payment, and that is a possible and reasonable alternative. I hope that, perhaps, the hon. Gentleman will supply that information.

Mr. Barber: I think that when we considered the Amendment in the


name of the hon. and learned Member for Kettering (Mr. Mitchison) both he and I went into some detail in explaining what the Clause was intended to do. Therefore I do not think I need worry the Committee by explaining it again other than to say that its sole object is to extend the scope of unilateral relief from double taxation.
The suggestion was made by my hon. Friend the Member for Harwich (Mr. Ridsdale) and my hon. Friend the Member for Eastleigh (Mr. D. Price) that there might be some doubt whether or not in framing the Clause we had gone wide enough. They asked me as I understand them, because I must also try to keep in order, two specific questions. The first question put by my hon. Friend the Member for Harwich concerned a tax which is levied by the Iranian Government and which is in form an Income Tax levied as a percentage of gross receipts. I happen to know this because my hon. Friend has been in correspondence with my hon. Friend the Financial Secretary about the matter. I am therefore able to tell him that this tax will not qualify for unilateral double taxation relief under Clause 16.
My hon. Friend the Member for Eastleigh asked me about taxes of a capital nature. I can tell him that in general these taxes will not qualify for unilateral relief from double taxation. In each case the reason is that the taxes do not correspond to the Income Tax or the Profits Tax in the United Kingdom, and this is the test which depends on the nature of the tax and which determines whether or not relief is available under the Clause.
In fairness to my hon. Friends and to what has been said by hon. Members opposite, I ought to explain why it is that the Government have maintained the view that the criterion should be the nature of the tax. I think that the whole Committee would agree that in cases where one is providing for relief from double taxation on a unilateral basis, there must be severe limitations on the kind of overseas taxes that qualify for credit against United Kingdom tax. To take an extreme case, no one would suggest that credit should be given for an overseas tax which corresponds to the Customs and Excise duties in the United Kingdom or to Purchase Tax.

Although I have given an exaggerated example, that basically is the reason why under our law credit is given only for overseas taxes which correspond to United Kingdom Income Tax and Profits Tax, and that is the basis on which the Clause is drawn.
I take it from the questions put to me by my hon. Friends that they have some doubt whether the Clause goes as far as is desirable. I have already mentioned in connection with the Amendment, and I repeat the point now because it is very relevant to the matters drawn to our attention by my hon. Friends, that it was the view of the Royal Commission—

Mr. Mitchison: The minority view.

Mr. Barber: No, it was the unanimous view—there was no minority view on this point—that there should be no change in the present rule whereby the governing test was to be the nature of the tax, in other words whether it corresponded to United Kingdom Income Tax or Profits Tax. I believe that is right. I need not take up the time of the Committee by reading again at length from the Royal Commission's Report, but I should refer the Committee to the last few lines of paragraph 700 of that Report because they give the gist quite fairly.
They read:
…we think that a general provision for unilateral relief must deal with broad categories only; a limited exception to the rule of correspondence for the purpose of meeting this situation would involve insuperable difficulties of demarcation.
This is why, basically, I think we are following the right line in maintaining the simple rule of correspondence to our own Income Tax and Profits Tax.
As the Committee will realise, I cannot answer the questions put to me by one or two hon. Members about individual taxes, such as the Quebec tax to which my hon. Friend the Member for Eastleigh referred. But this gives some indication that as drafted this is a very useful Clause because one thing that it will do will be to remove an anomaly which exists at present, in that credit is not due for taxes on income imposed by individual States of the United States of America. Hon. Members who have spent any time in the United States will appreciate that these are a comparatively


important sector of local taxes on income in the United States. They are not covered by the double taxation agreement we have with the United States because it is impracticable for the Federal authorities to enter into agreements with foreign Governments about State tax. Therefore this will be one very beneficial consequence which will flow from the Clause.
The hon. Member for Gloucestershire (Mr. Diamond), and the hon. and learned Member for Kettering in relation to Clause 14, asked about the cost of these various proposals. I am sorry to have to tell them that it is simply not possible to estimate the cost of the relief but the Inland Revenue considers that the cost is likely to be small. This, therefore, is a matter which we might consider on merits regardless of the cost, and that is something which my right hon. and learned Friend can rarely do.
I am sorry if the Clause does not go as far as some of my hon. Friends would have liked. I hope that I have made them appreciate that there are cogent reasons for limiting the extension of the relief in the way I have shown and I hope that they will take the view that the Clause as it stands can only work to the advantage of taxpayers and that consequently they will have no hesitation in supporting it.

Mr. Mitchison: My hon. Friends and I have listened with great care to what the hon. Gentleman has said. We still feel rather doubtful about the Clause. We have had a very interesting but in some ways a rather incomplete discussion and we must reserve such rights as we have to return to the matter later if need be.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 17.—(EXTENSION OF S. 448 OF ACT OF 1952.)

Motion made, and Question proposed, That the Clause stand part of the Bill.

Mr. Mitchison: This Clause raises a question about the houses of clergymen or ministers of various denominations and, in another connection, what is the same question has arisen quite lately with regard to rating and valuation. The root of the difficulty is that the question

of occupation—and this relates particularly perhaps to rates, but, also, I think, to this Clause—is sometimes a little doubtful.
It depends on a complexity of arrangements which vary from one denomination to another. The occupying body may be a council, or committee, or other governing body, or it may be the clergyman or minister himself, and with this goes the further question of how far the occupation is occupation as a residence and how far it is an occupation for the purposes of the office of the clergyman or minister.
7.0 p.m.
As I understand the Clause—and I shall ask the Financial Secretary to be good enough to correct and possibly amplify what I have been saying—its effect is to solve the whole variety of possible cases, or, at any rate, most of them, in the interests of allowing the clergyman or the minister to get the benefit of the house being used for the purpose of his office and occupied by him for that purpose so that he gets entitled to corresponding reliefs.
If I have the sense of the Clause right, I am sure that the Financial Secretary will not mind taking a few minutes to confirm it and, if need be, to amplify it and give us the Government's reasons for having introduced it. Very little was said about it earlier.

Mr. Donald Wade: I hope that this is an uncontroversial Clause, for it removes some long-standing anomalies. In some cases, dwelling-houses of the clergy and ministers of religion are regarded as dwellings to which the principle of representative occupation applies, but in other cases that principle does not apply. Where the manse or parsonage is owned and occupied by a charity, the notional income for Schedule A is deemed to be part of the income of the charity and is not payable or, if paid, is recoverable. However, where the principle of representative occupation does not apply, a different situation arises and in the past it has been impossible on principle to justify the differences of treatment between one denomination and another.
For example, a clergyman who is an incumbent of a parsonage may be regarded in law as a corporation sole, but the corporation sole is not regarded


as a charity and, therefore, Schedule A tax is payable. In the case of ministers of Nonconformist Churches, the principle of representative occupation does not always apply. The property may be owned by a charity, but be regarded as occupied by the Minister. He may occupy it free of rent, but for Income Tax purposes he will be assessed on the benefit of his interest.
I would rather that Schedule A tax was abolished altogether. That would be the simplest way of dealing with the problem. But so long as we have Schedule A tax it is reasonable that all denominations should be treated alike, and the object of the Clause is to ensure that all denominations are put on the same footing.
I happen to have some knowledge of this matter as I am the honorary treasurer of a denominational trust which owns a number of properties of this type, and I therefore welcome the Clause. I understand that it has the support of the Churches Main Committee and it is appropriate that this reform should be introduced this year as a similar alteration in the law is being made in the Rating and Valuation Bill, because similar anomalies have arisen in rating owing to the rather complex situation as it affects parsonages and manses.
I hope that I have accurately described the position, but, if not, no doubt the Minister will correct me.

The Financial Secretary to the Treasury (Sir Edward Boyle): I entirely agree with the hon. and learned Member for Kettering (Mr. Mitchison) that we ought not to grudge spending a few minutes on this Clause. Since my right hon. and learned Friend's Budget speech, the only reference to the Clause which I can remember was that made by the right hon. Member for Huyton (Mr. H. Wilson) when, on behalf of the Opposition, in the Budget debate he said:
we welcome the minor relief given to ministers of religion who pay tax as the beneficial occupiers of manses and vicarages."—[OFFICIAL REPORT, 18th April, 1961; Vol. 638, c. 988.]
This relief is the outcome of the consideration which Lord Amory last year promised to give to the tax position of clergymen. Last year we debated as we have debated on many occasions the question of Easter offerings in the Church of England, and on that occa-

sion Lord Amory, like so many of his predecessors, pointed out the very great difficulties of giving any such relief, but he promised to consult the representatives of the churches
to seek to find some relief which can be given without unfairness to others, and without too fundamental a breach of the principles of our tax law.
He went on to say:
We will see whether a practicable way of helping clergymen might be to find some means of relieving the burden of Schedule A Tax on parsonage houses as far as that falls on the incumbent."—[OFFICIAL REPORT, 6th July, 1960; Vol. 626, c. 491.]
The Clause is the result of the examination which Lord Amory undertook to make.
The hon. Member for Huddersfield, West (Mr. Wade) was quite right about this. The Churches Main Committee was never happy about the Easter offering proposal. In a curious way, that demand, felt very strongly in the Committee, was a demand by the laity. It is relevant to the context of this debate to point out that the Clause has the full support of the Churches Main Committee.
As the hon. and learned Member for Kettering said, the form of the relief substantially follows the pattern of a Government Amendment which has already been debated on the Report stage of the Rating and Valuation Bill. Roughly speaking, the Clause provides that premises which are owned or leased by a charity or, to cover the case of incumbents of benefices in the Church of England, ecclesiastical corporations, and which are made available as official residences of a full-time clergyman or minister of religion shall be treated as if they are owned and occupied by a charity. The effect will be to exempt the minister from tax under Schedule A except, of course, that if he lets part of his parsonage house, any rent which he receives will naturally remain chargeable to tax.
The present situation, as the hon. Member for Huddersfield. West fairly indicated, is entirely unsatisfactory. Some ministers living in houses provided by their denominations already pay no tax in respect of their occupation. Where a minister lives rent free in a house owned by his church and is required to do so for the effective performance of his


duties, the church itself or the denomination itself is regarded under Income Tax law as the real occupier and no liability under Schedule A is assessed in that case, because the minister's occupation is "representative" of the Church and, as a charity, the church is exempt from the tax.
Incumbents of benefices in the Church of England are not in this position. The freehold of their parsonage house is vested in them, and they are not representative occupiers but beneficial occupiers. Moreover, there are some ministers of other denominations whose occupation of the premises provided for them is beneficial and not representative. At present in such cases the minister is liable to tax under Schedule A.
That was not a satisfactory situation, and it is a merit of the Clause that it will not only provide some help for the clergy in the sort of way which the Committee has often considered in previous years but, perhaps more important, it will produce uniform treatment for all religious denominations.
It is in full accordance with the view of the Royal Commission on the Taxation of Profits and Income, which in paragraph 922 (2) recommended that the
annual value of a Church of England parsonage house should cease to be attributed to the incumbent as income, but this change should not exempt him from liability to tax on any income that he may derive from letting the property or any part of it.
The Clause has the twin merit that it treats all religious denominations fairly and in the same way, and that it provides some help in the tax position of clergymen, a subject to which the Committee has often devoted attention. It provides that help in a way that the hon. Member for Sowerby (Mr. Houghton) would regard as a great deal less objectionable than allowing them tax-free the "sacrificial offerings", as they were called, which we discussed last year On all those grounds I commend the Clause to the Committee.

Mr. Mitchison: May I ask the Financial Secretary—I am not sure whether the information has been given—what is the cost of this, and whether any estimate has been made of the rough proportion of people who have this relief already, as compared with those who do not get it but who will get it under this Clause?

Sir E. Boyle: I can assure the hon. and learned Gentleman that the cost of this relief will be negligible. I cannot provide a precise figure, but it will be negligible in amount.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 18.—(EXEMPTION FROM TAX OF CERTAIN INCOME OF PENSION FUNDS FOR OVERSEAS EMPLOYEES.)

Motion made, and Question proposed, That the Clause stand part of the Bill.

Mr. Mitchison: This again is a case where a little explanation might usefully be made. I put the situation as I see it to the Economic Secretary, if he is to reply.
This is a Clause to exempt certain income of pension funds for overseas employees, and, broadly speaking, the employees have to be employees of a trade or undertaking carried on abroad, but, I notice, only partly abroad, and the fund itself has to be a proper pension fund, according to subsection (2, c):
recognised by the employer and employed persons in the trade or undertaking;
The questions I want to put are, in the first place, in connection with:
…some trade or undertaking carried on wholly or partly outside the United Kingdom;
This is an exemption from tax, and, no doubt, it is for overseas employees, but does not the question whether the trade or undertaking is
carried on wholly or partly outside the United Kingdom
raise some difficulty? I should like to know why it is necessary to provide for "irrevocable trusts" in connection with some trade or undertaking carried on partly outside the United Kingdom. I should have thought that that might have opened the door rather wide.
It is quite true that when we come to the next paragraph of the subsection, the benefits have to be provided:
in respect of persons' employment in the trade or undertaking wholly outside the United Kingdom;
What exactly does that mean? Does it mean that the persons have to be employed wholly outside the United Kingdom? Let us take, for instance, the case of a branch office of a company in some foreign country carrying on what


may be taken, I suppose, to be a separate trade or undertaking. Would the pension fund be disqualified from this relief if it was used for people who made a connection, as it were, and acted as a link between that branch and the head office, and were constantly travelling to and fro?
Lastly, there is the, in my view, curious paragraph which states that the fund
is recognised by the employer and employed persons in the trade or undertaking;
I would have understood some reference to Revenue recognition, on the one hand, and that comes later, and I would also have understood some reference to recognition under collective arrangements of some kind, but I am a little puzzled to see what is meant by
recognised by the employer and employed persons in the trade or undertaking;
bearing in mind that the trade or undertaking need only partly be carried on abroad.
I feel that my hon. Friends would be strongly inclined to sympathise with the purposes of this Clause, but I think that the application of at presents some difficulty, and I should be most grateful if one or other of the two distinguished and hon. Gentleman in front of me would elucidate the matter.

7.15 p.m.

Mr. Barber: This Clause, as the hon. and learned Member for Kettering (Mr. Mitchison) has recognised, provides a limited tax relief for certain income arising to pension funds administered in this country which provide pensions for employees working overseas. I think that, before I come to the detailed points which the hon. and learned Gentleman made, it might be useful if I explained that at present a pensions fund in this country is liable to be taxed on its income unless it qualifies for the special relief for superannuation funds approved under Section 379 of the 1952 Act.
One of the conditions for approval is that the fund must be established in connection with some trade or undertaking carried on in the United Kingdom by a person resident in the United Kingdom. A fund administered in this country, the object of which is to provide pensions for employees working overseas for an employer overseas would, therefore, have to pay United Kingdom

tax on its income. In general, pensions have tended to be provided out of funds administered in the country where the employer is resident, but circumstances may arise, particularly in relation to United Kingdom employees working abroad for concerns registered abroad, in which the employees would feel a greater sense of security if their pensions were provided out of a fund administered in the United Kingdom. In theory, this can be done under the present law, but since the fund has to pay United Kingdom Income Tax on its income, it may not be able to afford to move from the overseas territory to the United Kingdom.
The effect of the Clause will be that a superannuation fund to which it applies will be able to invest in overseas securities without attracting liability to United Kingdom tax, and also, without attracting liability to United Kingdom tax, in those British Government securities issued with the condition that the income is not liable to tax if the securities are held by non-residents. Perhaps I may mention that such a fund will be exempt from tax on dividends paid out of trading income of an overseas trade corporation.
The hon. and learned Gentleman asked me one or two questions about the Clause itself. The object of the Clause is to treat these funds in the same way as the income of non-residents are treated, and for that purpose it is necessary, as stated in subsection (2, a), that it should be:
bona fide established under irrevocable trusts in connection with some trade or undertaking carried on wholly or partly outside the United Kingdom;
I should have thought that it was undesirable to have put the matter in such rigid terms that the trade or undertaking had to be carried on wholly outside the United Kingdom, when, in fact, it might have some activities here which would have precluded it from the advantages of this Clause.
Certainly, so far as I know, no difficulties are likely to arise, and I have not been informed of any cases or any aspects which the Inland Revenue consider might give rise to some form of avoidance, which I think is probably what the hon. and learned Gentleman had in mind. As I have not had the opportunity of considering this matter,


because this point has not been drawn to my attention before, perhaps I may be allowed to ask those advising me to look into it in the light of what the hon. and learned Member has said.
Paragraph (b) of subsection (2) provides that the Section applies to any superannuation fund which:
has for its sole purpose the provision of superannuation benefits in respect of persons' employment in the trade or undertaking wholly outside the United Kingdom.
We are here giving relief in respect of a superannuation fund on the basis of the reality of the situation—that is, of a non-resident taxpayer. Consequently, it is right that the person's employment in the trade or undertaking should be wholly outside the United Kingdom. The hon and learned Member will see that a little later on the same subsection reads:
and for the purposes of this subsection duties performed in the United Kingdom the performance of which is merely incidental to the performance of other duties outside the United Kingdom shall be treated as performed outside the United Kingdom.
In that case it would not work to the disadvantage of the employees, although it might well have done so if it were not for those saving words.
Finally, the hon. and learned Member asked me about paragraph (c). This reproduces one of the conditions for approval of a United Kingdom superannuation fund which is laid down in Section 379 of the income Tax Act, 1952. It has always been accepted that being "recognised"—which I agree is a somewhat strange word to find in an Act of Parliament—was one of the marks of a genuine occupational scheme. The fact that an employer contributes to the fund indicates that he recognises it. I am informed that for the employees the condition is not satisfied unless they have been told about the fund and about its provisions, and that before authorising relief the Inland Revenue must have evidence that that has been done.
It has been pointed out to me that that condition is a useful means of distinguishing a true occupational pensions superannuation scheme from other trusts, such as family trusts, and, although I still share the feelings of the hon. and

learned Member that the word "recognised" is a little odd, it reproduces one of the conditions for approval of a United Kingdom superannuation fund which are contained in the 1952 Act and which are working satisfactorily. In those circumstances, I hope that the hon. and learned Member will not take exception to the inclusion of this provision in the Clause.

Mr. J. T. Price: I am sorry that I was not able to be present during the short debate that we have had, but I am interested to note that the Clause carries out the exemptions normally granted to funds in respect of people resident in this country. I believe I am right in saying that the original tax reliefs on investment revenue derived from contributions paid by employees in relation to such funds were granted as long ago as 1921 in Great Britain, under Section 32 of the Finance Act, which has been amended in many respects by subsequent financial arrangements.
Since these reliefs are now embodied in the Clause, are similar provisions to be taken as read? Where an employee has been a contributor to a pensions fund and has been granted these reliefs and subsequently relinquishes or transfers his pension rights, does he or the trustees have to repay to the Treasury tax amounting to one-quarter of the standard rate, which is the practice in this country? In the case of a company registered in Great Britain the trustees are under a liability to pay tax at one-quarter of the standard rate in respect of every employee leaving the service of that company.
Since the Clause does not contain that provision, I wonder if corresponding arrangements are made in relation to previous legislation. If that is the case it would place overseas employees in a more favourable position than employees in this country, who have to make a refund of tax of one-quarter of the standard rate then in force. Perhaps the Minister will answer that question.

The Temporary Chairman: That question is not in order on the Question "That the Clause stand part of the Bill."

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 19.—(EXEMPTION FROM TAX OF COMPENSATION FOR NATIONAL-SOCIALIST PERSECUTION.)

Motion made, and Question proposed, That the Clause stand part of the Bill.

Sir Hugh Lucas-Tooth: Last year, I moved a new Clause to the Finance Bill designed to give relief to those victims of Nazi persecution who were subject to British taxation and who were receiving annuities tax-free in Germany. I need not go into details. All hon. Members who have taken an interest in the matter will remember the point. The Clause received general support from hon. Members on both sides of the Committee. This Clause gives effect to what I wished to do then, very fairly and very fully; indeed, more fully, because it does so with complete retrospective effect.
It also does so in a straightforward way. It gives relief from tax instead of resorting to some device. The Government are right in taking that view. This is an entirely exceptional type of case, and they have dealt with it exceptionally, simply by giving a specific relief. I thank my right hon. Friend the Chancellor of the Exchequer and also my hon. Friend the Financial Secretary for putting the Clause into the Bill. I can tell them and other hon. Members that I have received a number of letters of thanks from those who are affected by the Clause. We are all accustomed to receiving letters of complaint and abuse; we do not often receive many letters of thanks. I hope that they will be taken as thanks to all hon. Members who have secured this excellent result.

Mr. Wade: This Clause has all-party support. When one has been pressing for a reform for a number of years, and the reform is eventually introduced, it is very easy to let it pass without comment. But this Clause deserves a word of comment and commendation. I welcome the decision, although it is long overdue. When the compensation was computed I understand that it was computed on the assumption that no tax would be imposed by Great Britain, and it has never seemed fair that this should be levied.
It would seem that the decision now to be made as a result of the introduction of the Clause will bring the law into

line with that of Denmark, France, Eire, the Netherlands, Norway, Sweden, Switzerland and the United States. All those countries have allowed these victims of Nazi persecution to receive their compensation without deduction of tax. I welcome their relief and the fact that it will be to a certain extent retrospective. I have no doubt that other hon. Members will be of a like mind.

Sir H. d'Avigdor-Goldsmid: It is a rare pleasure to be able to say an unreserved "Thank you" to the occupants of the Treasury Bench and to my right hon. Friend and the hon. Friends who assist him. I must also thank those who have supported the proposal since 1957, and I want to refer particularly to the very important support we received last year from the hon. Member for Sowerby (Mr. Houghton) and from my right hon. Friend the present Minister of Health. At that time they interested themselves in a matter on which in a previous debate in 1957 they had taken opposing views. When credit for this important change of mind is given, I cannot help feeling that they contributed more than a little to this decision.
I should not like the occasion to pass without reference to my hon. and learned Friend the Member for Northwich (Mr. J. Foster) because he was responsible for initiating a similar Clause in 1957. I cannot help feeling that it was due to his initiative then that we now have this Clause which makes this exemption retrospective to 1957.
I think that we should place on record the names of those hon. Members who have contributed to this eminently satisfactory result.

7.30 p.m.

Sir E. Boyle: I rise only to thank hon. Members for their comments and to say how much I agree with them. This is the third time in recent years that we have discussed this subject, and I would not be human if I did not feel a good deal happier speaking in response to the debate on this Clause this evening than I felt late at night when I responded to the debate on the Clause on this subject last time, or my right hon. Friend the Minister of Health felt when he held my office and replied to the debate on this subject in 1957.
All hon. Members realise that this is not an easy matter. The exemption contained in this Clause is contrary to the general principle of the Income Tax Act, which is that receipts of an income nature are taxable, irrespective of the reason underlying their payment, and that the sole criterion of the liability is the taxpayer's ability to pay. I mention that because one has to remember how dangerous it can be to make changes in our Income Tax law and to introduce new principles without due consideration.
When we discussed this matter last year, I think the Committee felt that this compensation arises in what are demonstrably exceptional circumstances of unprecedented hardship and suffering, and I assure my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) that Lord Amory and my right hon. and learned Friend in reviewing this matter took full note of the views expressed last year by hon. Members on both sides.
I agree that it is an impressive point that the hon. Member for Sowerby (Mr. Houghton) and my right hon. Friend the present Minister of Health took different views last year from those they took in 1957. I also agree with what my hon. Friend said about the work of my hon. and learned Friend the Member for Northwich (Mr. J. Foster) in this connection. Not only has he advocated this case eloquently in the House, but also in deputations, and I was very impressed with his arguments when he led a deputation to see me soon after I returned to the Treasury.
The Committee can be very pleased this evening that we are exempting with retrospective effect certain compensation payments made by the Federal German Government or the Government of any constituent States to victims of Nazi persecution who are resident in this country. I am grateful for the response which the Clause has had.

Mr. Houghton: When I saw the Minister of Health come into the Chamber a few moments ago, I thought that he too had been drawn here by some hidden magnet to see a very happy conclusion to a matter which he and I had taken part in debating in years past.
I apologise for the temporary absence of my right hon. Friend the Member for

Huyton (Mr. H. Wilson) who intended to welcome this Clause. In view of my past it was thought that it was perhaps more suitable that he should do it than that I should. I am glad that the Financial Secretary said what he did because I am sure that those of us who took a certain view in 1957 were not just being cussed, and still less could it be said that we had no sympathy for the victims of this terrible period in world history. It was just that we felt that because of our basis of assessment for Income Tax purposes, and in particular the fact that we assess to Income Tax war widows' pensions whereas some other countries do not, that we were perhaps not in a strictly comparable position with other countries in granting exemption from Income Tax to these annuities.
However, as the hon. Gentleman said, there was a change of view last year, and I think we all felt that opinion was moving towards granting this exemption, doing it retrospectively, giving a reasonable time for claims to be made, and doing it in a most handsome and adequate way. I am glad that that has been found possible, and I am sure that it will bring great joy to all my hon. Friends that this disturbing question of taxation has been brought to a favourable conclusion. I am sure that the hon. Member for Hendon, South (Sir H. Lucas-Tooth), who has received letters from victims of Nazi oppression and horrors, fully deserves the thanks given to him. For my part, I was striving to defend the purity of our taxation system, and perhaps in this Committee that is something of which to be ashamed.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 20.—(CAPITAL ALLOWANCES FOR CARS COSTING OVER TWO THOUSAND POUNDS.)

Mr. R. Gresham Cooke: I beg to move, in page 16, line 13, to leave out "two thousand pounds" and to insert:
an amount calculated in accordance with subsection (3) of this section".

The Chairman: It might be convenient to discuss with this Amendment the second Amendment in line 13, the


Amendment in line 15, the two Amendments in line 16, the two Amendments in line 23, the two Amendments in line 25, the two Amendments in line 46, the two Amendments in page 17, line 20, the two Amendments in line 23, the two Amendments in line 35, the Amendment to Clause 21, page 18, line 2, the two Amendments in line 3, the two Amendments in line 10, the two Amendments to Clause 22, page 18, line 17, and the two Amendments in line 18.

Mr. Gresham Cooke: Yes, Sir Gordon.
The proposed new subsection, which is the Amendment to line 15, says:
The amount referred to in subsection (2) of this section shall be two thousand pounds together with the purchase tax paid at any time in respect of the vehicle concerned. Such amount is in this and the following two sections referred to as 'the said limit'.
The object of my Amendment is to increase the limit of chargeable capital expenditure by a company on a motor car from £2,000 to £2,000 plus the amount of Purchase Tax on the vehicle.
The Clause as it stands discourages companies from acquiring certain motor cars, particularly Rolls-Royce cars, and to a lesser extent Daimler cars. Incidentally, having regard to the Common Market, it will discourage companies from acquiring Mercedes-Benz cars.
It would be a tragedy for this country if the Rolls-Royce Company were to be driven out of the manufacture of motor cars. My private commercial interest would benefit from the Clause, because I happen to be a director of a company which manufactures cars costing under £2,000, but I think that the Clause is a mistake.
The Rolls-Royce Company is known today mainly as an aircraft company, but the development of the Merlin engine before the war, which went into the Spitfire and Hurricane, was based on the development of the motor car engine. In an integrated company there is undoubtedly a great deal of exchange of opinion between the aircraft side and the motor car side of that company.
I have been told, and I believe it to be true, that the sales of aircraft engines made by Rolls-Royce are greatly assisted by the presence of a motor car in every part of the world, which is used by many important people. My experience is that the Rolls-Royce has been an "ice-

breaker" in the past for the sales of British cars throughout the world because no one wanted to have a British motor exhibition in any part of the world without the Rolls being present. We are also told by the company that the exports of Rolls-Royce cars total £4·7 million per annum at present, which is half its output. People are apt to raise their eyebrows at the price of a car being £6,000, as the standard Rolls-Royce is, and at the fact that the price should be paid by a company, but included in that price is £1,750 Purchase Tax.
Secondly, the cost of the car is due to the high standard of design and specification because the company takes its components, not from the mass-produced components, but from a completely individualistic range. Thirdly, it goes in for individual testing of components and all the materials which go into the car and complete testing of every car. I think that I have said enough to demonstrate that this exceptional company, which has been in operation for fifty years, has brought great credit to this country in the past and does so at present.
The question before us is: does the Clause as it stands put the company and its 5,600 employees at Crewe in jeopardy? I suggest that it does. Half the output of the Rolls-Royce company goes into the home market. I have been told that already, by the presence of this Clause in the Finance Bill, the home order book has been cut by a third. That, as anyone concerned with industry would know, must tend to put up the price of the product. I should estimate that it might easily put it up by £400. That would start off a vicious circle and put the motor car further out of the reach of buyers at home and abroad.
Further, there is the question of the long-term prospects of this company. It is now considering laying down a further £3 million for development of a new model. The directors obviously had a grave decision before them whether to go on with such a long-term development. We have to be practical in this Committee and not merely theoretical. Wherever one goes in any industry all over the world there is a hierarchy in every industrial company, and that is reflected in office staffs. There is a


hierarchy in this House of Commons. The ordinary private Member has the smallest and humblest locker available. A Minister has a small room, but the Prime Minister, the Chancellor of the Exchequer and other important Ministers have good-sized rooms.

Mr. Julian Snow: They all have one vote.

Mr. Gresham Cooke: That is true in industry, and it reflects itself in the size of the motor car used in an industry. The commercial traveller has a very modest family car; the executive managers have medium-sized cars, such as Humbers. Then one works up to the chairman and directors of a large company and find that they have a Rolls at their disposal—and why not? It is not an unusual pattern. One of my sons was the other day working in a foundry. Men who work in foundries earn very good wages nowadays and one of those men had a Vauxhall Cresta. When I turned up at the foundry in a medium-sized car, the worker said to my son, "Is that all your dad can afford, a car of that type?" That is the ordinary industrial attitude.
In 1947, Mr. Dalton, the then Chancellor of the Exchequer, doubled Purchase Tax on cars over £1,280 by raising Purchase Tax from 33⅓ per cent. to 66⅔ per cent. That was in line with the sumptuary legislation in those days. The result was to drive about half a dozen cars out of the market. In 1950, Sir Stafford Cripps, assisted by the right hon. Member for Battersea, North (Mr. Jay), had the good sense to see what was happening. He abolished double Purchase Tax on the more expensive motor cars in order to keep those firms going. This legislation today is in my view exactly in the same tradition as that double Purchase Tax. It is equally discriminatory and Socialist legislation.

Mr. J. T. Price: Since the hon. Member introduces ideology into this, we had better get the facts straight. He is aware that the Purchase Tax on a Rolls-Royce, or any other make of car, if the car is used for business purposes, plus the cost of the vehicle, is chargeable as an allowance under Schedule D, and also as an allowance against Profits Tax of the company. If this matter is to be

viewed as a question of prestige or class status, to put it more crudely, we should have to deal with the type of gold-plated car which Lady Docker and other very important members of the community have had. We have no objection to people who can afford them having sumptuous cars so long as the taxpayer is not expected to pay for the luxury, as is happening now.

7.45 p.m.

Mr. Gresham Cooke: If the hon. Member takes that view, logically no car should be chargeable against business profits.
I think that the Chancellor has probably been worried, as a number of other people have been worried, by stories which are current from time to time of abuse of the use of motor cars required for business purposes. He may well be worried, but in my view there is plenty of machinery for dealing with that. If a businessman were to buy a Bentley and use it to go to the golf links instead of for business purposes, the usual practice by which one-seventh is charged back to him could be charged back by the inspector at a very much higher rate. He might be charged five-sevenths on the oar as an emolument or benefit in kind. We have plenty of machinery to take care of that.
If there is any abuse it is not confined to higher-priced cars. If the commercial traveller takes his family to the seaside in the most modest mini-car, and charges it to his company, that is an abuse which, in my view, should be brought to the notice of the inspector just as much as in the case of the abuse of the use of the higher-priced car. The method of dealing with possible abuse under this Clause is a rather ham-handed one. Anyone who travels about the world, as many hon. Members do, and meets top executives of big companies throughout the world, knows that in the United States the top executive uses a Cadillac and in Germany he uses a Mercedes-Benz. It would be a tragic day if the directors of big companies were prevented from driving in the highest quality car of all in this country.

Mr. Scholefield Allen: If the firm is prepared to pay for the prestige let it have the car, but it should not come out of the taxpayers' pocket.

Mr. Gresham Cooke: I was surprised that the hon. and learned Member is not doing more to support his constituents.

Mr. Scholefield Allen: If the hon. Member will wait until I have the benefit of catching your eye, Sir Gordon, I shall put my point of view.

Mr. Gresham Cooke: No doubt the hon. and learned Member will do that.
I was handed only today a resolution, passed this morning, by the British Engineering Association. That is an industry which deals more with nuclear matters than other things. The resolution says:
The British Engineers' Association, representing the mechanical engineering industry of this country, views with great concern even the possibility of Rolls-Royce Ltd. ceasing to carry on business as manufacturers of motor cars as it regards Rolls-Royce as the hallmark of British craftsmanship and excellence bringing great prestige to the whole British engineering industry.
My hon. Friend the Member for St. Marylebone (Sir W. Wakefield), who apologises for not being present today, having had to speak at a dinner tonight, raised an interesting point in Question No. 39 today, when he asked the Chancellor of the Exchequer
what is the present practice with regard to the capital allowances which are permitted in respect of the use of private aeroplanes by business executives; and whether any maximum limit with regard to the cost of such aeroplanes is imposed in connection with such allowances.
My right hon. and learned Friend replied:
A concern which uses a private aeroplane for business purposes, for example, for the transport of directors or employees, may claim the ordinary capital allowances available for machinery or plant. There is no limit on the cost ranking for such relief.
My hon. Friend the Member for St. Marylebone pointed out to me that an aeroplane may cost £20,000 to £30,000 and that it may carry employees and directors about. He asked what is the difference between an aeroplane and a motor car beyond the fact that one carries them in the air and the other on the ground.
The Amendment suggests a compromise, which I hope the Government will regard as helpful, by including Purchase Tax within the limit suggested in the Clause. Purchase Tax is responsible for one-third of the cost of

a motor car today, and it is, therefore, logical to include it in the limit. If this were done we should be giving a chance to one of our oldest and proudest companies to adjust itself gradually to a change instead of its standing, as I believe it does, in great jeopardy at present.

Mr. Scholefield Allen: I take a diametrically opposite view to that of the hon. Member for Twickenham (Mr. Gresham Cooke). In effect, he wants to increase the £2,000 to about £3,600, and my Amendment suggests reducing it to £800.

Mr. Hirst: That is hardly helpful to Crewe.

Mr. Scholefield Allen: The Rolls-Royce Company has a long and honourable history. It started in 1905. Without the slightest doubt it produces the finest motor car in the world. In pre-war days my constituency of Crewe was practically a railway town, with no diversification of industry, and anybody who lived through the depression of the 1930s knows what a terrible thing it was to see a one-industry town when that industry was assailed by the economic blast.
In the years before the war we welcomed Rolls-Royce to Crewe. It is probably not well known, but it is a fact, that the car production of Rolls-Royce is nowadays concentrated in Crewe. So long was Rolls-Royce in Derby that many people, on seeing a Rolls-Royce, think that it has been made in Derby, but the whole of the car production of Rolls and Bentleys is concentrated in Crewe where the company employs 6,500 people, slightly more than half of them on cars. The company produces 2,400 cars, Rolls and Bentleys combined, in the course of a year, and 1,300 of them go to the home market and 1,100 go to the export market. In other words, nearly 50 per cent. are sold abroad. Their export value is £4,600,000 and the proportion of the dollar market is 2½ million dollars.
I do not know who advised the Chancellor in this matter, but I do not think that he was well advised and I am sure that he did not appreciate the facts of this Clause. I am very glad that the Chancellor is in the Chamber and that I can say this to him: the


effect of the Clause as it stands is a direct stab in the back for one company and practically one company only—Rolls-Royce and Rolls-Royce cars. That company is concentrated in Crewe and all its workers are in Crewe. If the Chancellor had wanted to single out one firm or one industry in this country for a very cruel stab, he could not have thought of a better way than fixing the amount at £2,000.
I am suggesting, contrary to the proposition of the hon. Member for Twickenham, that the allowance should be £800, and I hope that the Chancellor will give serious consideration to this proposal. The reason that I propose it is that we on these benches all recognise that there is some case for a modest car being employed in the ordinary business of a company's production. In a range around £800 there are many cars in which one can ride in comfort, in fact, in luxury. They are grouped around that figure of £800. Anybody who does not want to keep up with the Joneses and does not wish to ride in a prestige car can be happy in any of a large range of cars costing about that amount. I need not mention names because they will occur to hon. and right hon. Gentlemen as soon as they are mentioned.
These cars are adequate for the purpose. If we fix £800 as the maximum, then in my view it will be of considerable assistance to Rolls-Royce. Instead of seeking out Rolls-Royce, in particular, as has been done in this Clause, thus having a more damaging effect upon the Rolls-Royce Company than on any other manufacturer of motor cars in the country, the proposal will be much fairer. That is the view of Rolls-Royce.
If the Chancellor accepts this figure of £800, what do we do? First, we congratulate him on having the courage to bring in Clause 20 in the first place and to mention an amount of £2,000, because we all know that there are great abuses. We congratulate him on that. We can also congratulate him on having taken a good step without depriving himself of the better step of reducing the amount to £800, thus providing a proper allowance for an adequate car and not concentrating this blow entirely on Rolls-Royce.
If we have an allowance of £800 we shall find a number of cars which can be bought in that range. There are a number of other cars up to a limit of £2,000 which a company can buy if it is prepared to pay. No doubt a large number of companies, for prestige reasons, will pay the extra amount, even if they have to pay taxation on it and do not receive the general allowance.

Mr. Gresham Cooke: Mr. Gresham Cooke rose—

Mr. Scholefield Allen: The hon. Member had a very good go. He made suggestions against me before I was able to speak. Therefore I shall not give way
8.0 p.m.
If the Chancellor of the Exchequer does not accept my suggestion he will do a great service to companies like the Jaguar Company, which produces just about the last word in cars costing about £2,000. He will do a great disservice to the company manufacturing the finest motor car in the world. Last August I was sitting near Lake Iseo having a cup of coffee. I saw a crowd of people of all ages and sizes obviously looking at something. As I had nothing better to do, I strolled over to where the crowd was to see what was happening. I was proud, as the Member of Parliament for Crewe, to find that a wonderful Rolls-Royce had driven up to the side of the lake. The crowd was looking at the Rolls-Royce. Wherever there is a Rolls-Royce on the Continent little groups of people surround it because they recognise, as it is recognised throughout the world, that the Rolls-Royce is the finest of motor cars.
I earnestly appeal to the Chancellor of the Exchequer to accept my Amendment. He has done one good thing by limiting unjustifiable expense claims. He should go a little further. If he does, he will increase his revenue. He will save the Rolls-Royce Company, because he will place it in a fairer position vis-à-vis manufacturers of cars costing between £800 and £2,000. He will save Crewe, which depends upon this industry. If the Chancellor acceded to the suggestion of the hon. Member for Twickenham, he would not do a service but a disservice.

Mr. Hirst: I do not question for one moment the aim and sincerity of the


hon. and learned Member for Crewe (Mr. Scholefield Allen) in standing up for the Rolls-Royce Company. However, I cannot have been the only hon. Member who, when listening to him, questioned in his mind whether the hon. and learned Gentleman's proposition was being advanced by the Rolls-Royce company.

Mr. Scholefield Allen: The proposition has been advanced to me personally by the shop stewards and workers in the Rolls-Royce Company. The company knows that I hold this point of view. I have explained it to the company. As I gathered, the company's view is that my proposal is better than the present proposal. The company understands and appreciates that the suggestion of increasing the sum is not likely to meet with much favour from the Chancellor of the Exchequer.

Mr. Hirst: I am very grateful to the hon. and learned Gentleman for that explanation. I still wonder if the Rolls-Royce company can have understood it, because the net effect of the proposition would be to increase the swing against Rolls-Royce by precisely £1,200, making it all the more unlikely that the people we are considering would want to buy this excellent car, which is of such advantage to everybody. I have never heard a proposition advanced by an hon. Member on behalf of his constituency which is less likely to be helpful to it, as any hon. Member who has studied the problem will recognise. However, that is the hon. and learned Gentleman's funeral.
I prefer to deal with the Amendment of my hon. Friend the Member for Twickenham (Mr. Gresham Cooke), to which I have added my name. I support it. My hon. Friend advanced an extraordinarily good case. I do not want to go over all the ground again. I agree with the hon. and learned Gentleman's attitude at least in this respect, that despite my profound regard and respect for the Chancellor I am staggered at him taking this step. When I have been here much longer, I may understand the working of my right hon. and learned Friend's mind. I have known a few Chancellors in my time. However good a Finance Bill is, every Chancellor must pepper it with what I call pieces of nonsense, which this proposal is. The Chancellor is a

good enough friend of mine to accept that mild word.
I do not like the proposal, and I do not see its significance and purpose. I know what the Chancellor is aiming at, but I do not see the significance of it. I entirely support what my hon. Friend the Member for Twickenham said. The Rolls-Royce is a fantastic prestige car. It has no equal. For a long time it has been advertised as the best car in the world, and throughout its long existence it has maintained its high standard and merited that description. There is not the slightest doubt that it is an ambassador.
There is no doubt that people coming to this country are flattered by being met by a Rolls-Royce. [Interruption.] It is no use hon. Members opposite saying that business people do not react to the car in that way. I have met many of them, and I know that they do. They are flattered to be met by what they regard as the best car in the world. That may be distressing to the manufacturers of other cars, but it is the fact.
What has my right hon. and learned Friend set out to do? He has not set out to damage the Rolls-Royce company. I am sure that that is not in his mind. Beyond saying that, I do not know what is in his mind, except that he thinks that something should be done about the expenses racket—as it has been called. [HON. MEMBERS: "Oh."] The racket is much worse in other directions—meals, etc. I admit that, and we all know it. I must not develop that, because it has nothing to do with group of Amendments. There is not a great racket as regards cars.
What is serious is that we should take any step of this sort. This debate alone is bad for Rolls-Royce and bad for all the company stands for. The Rolls-Royce car has gained a reputation which hardly any other piece of machinery has ever enjoyed. It is sad that the Government should make this mistake. It is bad that this proposal should ever have been put into the Finance Bill. I shall not withdraw that, because that is how I feel. I always say what I feel, whether it is popular or not.
What will be the financial significance of the Government's proposal? How much will the proposal save and claw


back into the Exchequer? There will be a loss in Purchase Tax. A phenomenal amount of Purchase Tax is attached to each of these cars. If this action adversely affects the sales of Rolls-Royce cars, as it certainly will, what shall we achieve by this piece of window-dressing? I do not like it. It will be very damaging to the prestige of our country.
I support every word that my hon. Friend said. It is most unfortunate that a provision such as this should be included in the Finance Bill. It will damage one company alone. The car division of the Rolls-Royce Company spends a vast sum of money on research and development, a great deal of which is useful to the company in other spheres. This is an important factor.
I will now examine the alternatives which have been suggested. The incredible suggestion of the hon. and learned Member for Crewe was that the figure of £2,000 should be further reduced to cover a whole range of cars. It is the same old story of the desire to level everything down. It has been Socialist philosophy through the ages, but it does nothing to help. It will do everything to damage even further the Rolls-Royce Company which my right hon. and learned Friend, perhaps unwittingly, has involved in this issue.

Mr. Jay: The hon. Member objects to what he calls levelling down. Surely he would rather treat all motor car companies equally and fairly than strike a blow at one company.

Mr. Hirst: That is exactly what the Government's proposal does. It will strike particularly at one class of car.

Mr. Jay: That is what I said.

Mr. Hirst: There is no point in levelling it down. I am trying to level it all up again to something like its former status. [Laughter.] Hon. Members opposite can laugh as much as they like. If they do so, they will only cast themselves in the rôle of fools.
What my hon. Friends and I are endeavouring to do is clear, namely, to go some way back to the present position, which will obtain until the Bill becomes an Act.
We are not asking my right hon. and learned Friend—although we should—

to wipe out this proposition altogether. We are being reasonable. I do not like being reasonable all through the proceedings on a Finance Bill, but here I am being reasonable, and I say that my hon. Friend the Member for Twickenham has suggested a compromise that would do something to avoid if not all the damage at least a great deal of it.

Mr. Snow: I shall not attempt to follow the hon. Member for Shipley (Mr. Hirst) in his somewhat confused mathematics. If he would only have some regard to the pattern of employment of cars in commerce he would realise that there is a grossly inflationary tendency which I should have thought he would be the first to try to defeat.
I must admit that when I first saw the Chancellor's proposal I had very grave doubts about it—and I still have them. I do not speak with any constituency interest here, but I cannot get out of my mind the fact that in the few years preceding the war this country owed a very great debt to the technological level achieved by the Rolls-Royce Company. Many ultimate weapons of war had an origin that was, broadly speaking, a civil origin. The engines for some of the aircraft used at the beginning of the war, the engines used in the power boats for the Royal Air Force and for the Navy had origins which, in the late 'thirties, were of purely civil interest. The Government will be doing a great disservice if in any way they threaten the perfection of teamwork at high technical level that has been one of the master achievements of the company.
On the other hand, I can understand that the Chancellor, like many of my hon. Friends, has been worried by the irritation that many people feel about the abuse of the purchase of these high-priced cars by people in business. Unfortunately, the Rolls-Royce and the Bentley have become status symbols. The most ordinary sawbones in Harley Street must have a Rolls-Royce or a Bentley or he will not get his trade—

Sir D. Walker-Smith: Wait until the hon. Gentleman next has an operation.

Mr. Snow: I would say that that is also true of the legal profession—if there are sawbones in that profession; I do not know, but there is no doubt some


equivalent. If one goes to any point-to-point in the country one will see these very expensive cars being operated on the charge of controlled-loss farming. We all know these things.
The hon. Member for Twickenham (Mr. Gresham Cooke) said that the provisions of the present fiscal law would take account of the abuse of the operation of these cars for private purposes. He knows as well as I do that these provisions are unenforceable. We should need a vast army of inspectors to enforce them. At the same time, I think that the company is under a misapprehension. I wrote to the management to find out certain of its viewpoints on the question of the abuse of purchase of cars for alleged commercial purposes. Those concerned in the company are under the impression that the existing legislation already empowers the Inland Revenue to disallow any expenditure that is not solely, exclusively and necessarily incurred in the course of business. That is utter nonsense—and, with great respect to the directors of Rolls-Royce, they know that it is a lot of nonsense.
Having said that, I still come back to the point that if the Chancellor's proposal can in all fairness be construed as a threat to the technical team built up by Rolls-Royce, he should think again. People say that the aero-engine, the oil-engine and the motor car divisions of Rolls-Royce are virtually separate companies. With respect, I think that is a superficial view. One cannot but admire what has been done by this company over the years, and acknowledge the very great debt that we owe to Rolls-Royce, whose examples, starting as examples of production of craft material, have been followed in the mass production of vehicles and machinery in industry as a whole.
8.15 p.m.
I have therefore come to the conclusion that the proposal put forward by my hon. and learned Friend the Member for Crewe (Mr. Scholefield Allen) is about right. It was either the hon. Member for Shipley or the hon. Member for Twickenham—I am not sure which, but they were both on the same point—who talked of a hierarchy which, at the top, uses the Rolls-Royce and at the bottom uses a cheap Vauxhall or Ford. In fact, as my hon. and learned Friend has said, these so-called cheap Vauxhalls and

Fords are very good vehicles indeed and they supply all the comfort that the ordinary person wants.
The fact of the matter is that inflation in salaries is directly produced by the sort of argument advanced in regard to Rolls-Royce. There is not the most humble field representative of a commercial distribution company who does not demand, as a method of tax evasion, a car as part of his salary. I should have thought that the argument would have been in favour of some measure whereby everyone pays for his own motor car and that, where cars are necessary for business, they should be marked as business cars, or should be chargeable in such a way that there is no possible abuse—abuse that is recognised by many companies as a means of getting staff and of avoiding paying higher salaries.
I therefore support my hon. and learned Friend, and say that these provisions would put some sort of stop to the existing tax avoidance. One can drive a coach and horses through the present provisions—or, perhaps, in this context one should say that one can drive an expensive Rolls-Royce or Bentley through them. The results of that are inflationary, and I think that a limit of £800 would produce results far more satisfactory from the inflation point of view than would any of the suggestions coming from hon. Gentlemen opposite. Nevertheless, I repeat to the Chancellor, "Please do not do anything that would prejudice the craftsmanship represented by Rolls-Royce." It is not just a matter of prestige; in my opinion, it is a national asset.

Mr. William Clark: I should like to follow the example of everyone who has so far spoken in this debate by paying tribute to Rolls-Royce. The amount of work that the company has put into the development of engines generally has been of great benefit to the country. I could not quite follow the argument of the hon. and learned Member for Crewe (Mr. Scholefield Allen). He appeared to argue that my right hon. and learned Friend the Chancellor had stabbed Rolls-Royce in the back, and that, therefore, every other car manufacturer should be stabbed in the back.
There is one thing that I do not like about the Clause. I think that I am


right in saying that this is the first time that the Inland Revenue has said, "Thou shalt not pay so much for any particular capital item." This is a dangerous precedent. The Inland Revenue has said, "If you spend so much money, we will add back a certain proportion and charge you on it as income," but I do not think it has ever said, "You shall not pay so much for a vehicle."
My right hon. and learned Friend's purpose here is to limit the amount of tax relief given to a company, or to an individual if he happens to be in business. The emphasis that the Chancellor has placed on this is the wrong emphasis. I do not think it matters what the vehicle is provided that the allowance given for tax purposes is controlled. I would rather the Chancellor had controlled the capital allowance per year instead of saying that the capital value of the vehicle should be a set amount.
If we consider two types of car—the ordinary car about which hon. Members have been speaking and the Rolls-Royce—the car costing £800 in the Amendment moved by the hon. and learned Member for Crewe, if used wholly for business purposes—and for the purpose of my argument I shall assume that it is—the taxpayer or the company must prove to the Inland Revenue that the car has been purchased for that purpose. In the first year of purchase the taxpayer will get an initial allowance and one year's annual allowance.
That allowance, in many cases, is too high for the first year because if one buys a new car one finds that the initial allowance and the first year's capital allowance more than compensate the taxpayer for the market depreciation of the vehicle. Let us consider the case of the Rolls-Royce. I understand that it costs £6,000—and I must make it clear that in my constituency we are not directly concerned with this lavish sort of vehicle and I am not the owner of one—and the initial allowance and the capital allowance for the first year is about £3,000.
This means that at the end of one year, for tax purposes, the Rolls-Royce car will be worth £3,000. I am told in the trade that a Rolls-Royce depreciates in market value at about £1,200 to

£1,500 in the first year. Consequently, with the initial allowance for the first year and the ordinary allowance any owner of any car, whether a Rolls-Royce, Ford or Humber, receives allowances in excess of the actual market depreciation.
This does not normally matter, because in the second year the allowance is given on a reduced figure. After two or three years one still finds that £800 or £900, for tax purposes, has been written down and the value of the car roughly approximates to its market value. It will be found that a Rolls-Royce car, over four or five years, depreciates at an average annual amount of £500. I am told that after five years a £6,000 Rolls-Royce is worth about £3,500.
If the Revenue were to restrict the capital allowances that are given for any particular vehicle—whether a Rolls-Royce, Ford or Humber—it would be found that on the lower-priced cars there would still be an initial advantage and that the taxpayer would still get an excess allowance over the market value of the car. It must be remembered that not many people buy a new Rolls-Royce every year. I dare say that the average period for retaining a Rolls-Royce is four or five years. Over such a period the car will depreciate by about £500 a year.
I should like the Chancellor to look at this matter again, for he should have placed the emphasis not on the capital cost of the vehicle—no matter what the vehicle—because it is a dangerous precedent to restrict the annual capital allowances available for vehicles in this way, not only for the Rolls-Royce Company but for every car manufacturer in the country.

Mr. J. T. Price: I hope that the hon. Member for Nottingham, South (Mr. W. Clark) does not assume that this is the first time hon. Members have debated the principle involved in this Amendment. This year we are merely debating a particular application of an aspect of taxation which has often come before the Committee in the years I have been here. On a number of occasions I have ventured to express certain views about the whole system of motor taxation reliefs and those views have not been shared by a large number of


hon. Members opposite or, indeed, by some of my hon. Friends.
I do not in any way challenge or dispute the high regard in which everyone who has a knowledge of British industry holds the Rolls-Royce Company and its products, which are unrivalled in the world.
Coming back to the comments of my hon. and learned Friend the Member for Crewe (Mr. Scholefield Allen), I know, being Lancashire-born, that the Rolls-Royce Company began its operation about sixty years ago in a back street in Manchester when a craftsman, a special genius, applied himself in such a way that he built up this wonderful industry which is the admiration of the world. Therefore, what I have to say in a critical sense does not reflect in any way upon the Rolls-Royce Company, or the high regard in which it is held here.
My hon. and learned Friend the Member for Crewe has suggested a variation of the principle embodied in Clause 20. On this question, when we are dealing with the basic facts of the situation, one thing was skilfully avoided by the hon. Member for Shipley (Mr. Hirst), who assumed that this idea of granting an extraordinary tax relief under the Income Tax Act of 1952 is something that could be taken for granted.
The initial allowances were given under that legislation, and have been amplified and varied from time to time in subsequent legislation. The initial allowance of 30 per cent. was intended at that time to be an encouragement to British industrialists and capitalists to plough more money back into industry in the form of machinery and plant in order to gain greater efficiency.
I do not suppose that anyone imagined at that time that that legislation would ever be applied to motor cars. Who can say with any certainty that a motor car, whether used in the normal utilitarian way or for prestige purposes, such as the Rolls-Royce, is aiding production? It may aid distribution and public relations, but not one can say that when Parliament laid down the initial allowance of 30 per cent. it would apply to motor vehicles. I admit that I did not think it would, and I believe that the whole system is being abused.
Some years ago the Economist carried out an inquiry in which it was revealed

that over 70 per cent. of all motor cars on British roads were chargeable, in part or in whole, to Schedule D, as business expenses. It is now complained by some hon. Members, who are objecting to what the Chancellor is doing, that this is an unfair penalty placed on the motor industry or upon the users of luxury cars.

8.30 p.m.

Mr. Hirst: The hon. Gentleman was having a sly dig at me. I was not objecting or suggesting that various forms of allowances should remain the same every year in all circumstances. In fact, I saw a great deal of merit in the argument of my hon. Friend the Member for Nottingham, South (Mr. W. Clark). What I object to is what the Chancellor has done in this Clause, because it happens to hit one company in the main. That is altogether different.

Mr. Price: I quite understand that point though I do not fully accept its implications. In fact, the 70 per cent. of cars on British roads which are carrying these enormous allowances for tax purposes are carrying not only the initial 30 per cent. plus the 10 per cent. per annum depreciation allowance, but allowances in respect of Schedule D drawbacks when Schedule D assessments and liabilities are calculated, and Profits Tax allowances, too. One begins to wonder who is paying for the use of the millions of cars on the road.
We sometimes hear complaints from hon. Members about the very high rate of Purchase Tax on cars. It used to be higher, of course. In fact, when one takes the total cost of a motor car—a Rolls-Royce or any other—when it is charged back for tax purposes, those drawbacks include quite legitimately not only the capital cost of the machine itself but also the Purchase Tax. All is loaded against the account. I hope that the Chancellor will have a close calculation made at the Treasury one day about how much net taxation is held by the Treasury after all those drawbacks and allowances have been taken into account.
I fully understand that if in practice a step taken by the Chancellor—a discriminatory step, some hon. Members will say, I suppose—has the effect of


hitting Rolls-Royce more harshly than it his its competitors, there is a case for arguing for an adjustmnt. I am much attracted by the suggestion put forward by my hon. and learned Friend the Member for Crewe, that is, to reduce the amount to be allowed. My own position is quite clear. I do not think that there should be any allowance at all. I may be in a minority of one of thinking that. [HON. MEMBERS: "No."] If hon. Members complain, whatever their politics may be—I am not discussing this ideologically; I try to be objective in these matters—that because Rolls-Royce cars will not now carry an initial allowance of about £2,500 as they have hitherto if chargeable to a business, they are complaining really that British business men and the top tycoons of big concerns will stop buying Rolls-Royce cars if they have to pay for them out of their own resources instead of receiving an enormous subsidy from public funds for the purpose. That is an immoral approach. I do not want to import any undue heat or passion into the discussion, but this is not just a question of the economics of the motor industry. It is a matter of public morality.
When hon. and right hon. Members talk to us on this side so patronisingly, what they say amounts to this, "We object to the Chancellor putting his foot into a nice little concession which we have been enjoying for a long time, and we do not like paying for our motor cars. We want to have a large of the cost paid out of public funds."
There is an old axiom of politics which, in a bowderised version, goes like this: if somebody is getting an advantage without paying for it, then somebody else is paying for it without getting it. It put that quite seriously in the context of this debate. The cause of the complaining and "belly-aching" which we hear about is that, for the first time—I congratulate the right hon. and learned Gentleman quite sincerely on his vision—the Chancellor has seen that the concession in its present form is no longer justified. This is the first sign from the Treasury Bench in recent years that the argument we have advanced so often for so long is at last beginning to bear fruit. If, unfortunately, Rolls-Royce, with all its marvellous traditions, is exposed to special hardship, the Chan-

cellor must look into the matter again and take counsel with the rest of us about what should be done. At the moment, I believe that the suggestion made by my hon. and learned Friend the Member for Crewe is probably about right.
Cars are used for prestige purposes today to an enormous extent. They are used as a sort of ground bait to attract people, and both the cars and the companies are graded into different categories. In order to attract the high executive people which industry must have, certain companies, as is well known, will say that, if a man is after a top job, he might be given a Rolls-Royce. Another large company a little lower down the scale, in the second division perhaps, will offer a Jaguar. Among the smaller fry a man gets a Ford or something like that.

Mr. Hirst: Or a minicar.

Mr. Price: Or a minicar. The hon. Member for Twickenham (Mr. Gresham Cooke) knows this perfectly well, and so does the hon. Member for Shipley who is laughing loudly at this moment. For the first time, we see this year a partial break through the hypocritical idea that firms need to use these very expensive motor cars but they are not prepared to buy them unless the Chancellor stands a big part of the money. It is time this stopped. If we are likely to hit Rolls-Royce or any other company, we must consider what adjustments should be made. I should like to see the whole apparatus of initial allowances for cars go.
Why should I as a private motorist, together with other citizens in the minority of 30 per cent., have to pay the full cost of a motor car, including Purchase Tax and all the running costs, while those in companies are able to charge back to business account all those expenses where a person is on Schedule D?
I apologise for having taken so long. This is not just a matter of economics. It is a matter of morality. I am a little ashamed to see that so many hon. Members opposite speak with the tongue in the cheek and refuse to face the serious depressing effect these matters have on the industrial psychology of ordinary people who know that the rackets are going on and that, what is


more, they are countenanced and condoned by many hon. Members of the House of Commons.

Mr. Jay: I have no interest to declare in this matter, because the only place where I have ridden freely in a Rolls-Royce is Moscow, the Rolls-Royce being that of the British Ambassador. My hon. and learned Friend the Member for Crewe (Mr. Scholefied Allen) talked about the crowds which gathered round a Rolls-Royce at a lake which he had visited. The trouble about using a Rolls-Royce in Moscow is that, the moment one stops, it is almost impossible to start again because of the size of the crowd which gathers.
There is no doubt that in that country, as in many others, the Rolls-Royce car, quite apart from the rest of the work of the company, is a great advertisement for British industry. I agree that the Rolls-Royce Company is a great national asset. Its jet aircraft division is a branch of British industry which is ahead of the rest of the world. I do not think that any of us should lightly take any action which would damage this company or the technical lead which it at present holds. The Crewe and Derby works have been mentioned. There is also the extremely important factory at Hillingdon, which was of the greatest importance to war industry in war time and is highly important to employment in Scotland at present.
The real trouble is that the Chancellor has, rightly in principle, tried to strike at an abuse. Although it would be more appropriate to argue this on the Question "That the Clause stand part of the Bill", I agree with my hon. Friend the Member for Westhoughton (Mr. J. T. Price) that the whole initial allowance on passenger cars is an abuse and should be got rid of. The trouble is that we have allowed this abuse to go on for so long, although I have been protesting against it since 1952, that it cannot be got rid of without hurting somebody.
There seems to be some evidence, bearing in mind both the abuse and the importance of the Rolls-Royce Company, that the Chancellor has, inadvertently, chosen a way of doing it which risks doing damage to a particular company. I am informed that by setting the level at the figure chosen the effect

is to strike a considerable blow at this company and, incidentally, to benefit the Jaguar Company—I do not think there is any reason why we should not use its name since we all know it—which, I believe, happens to come next in the hierarchy of cars ladder which was described earlier this evening. I do not think that the Chancellor in his tax-collecting capacity, would wish to penalise one company, or, accidentally or unintentionally, to subsidise another. I imagine that if this is the effect of what he has done, it is unintentional.
I was attracted by my hon. Friend's proposal to put the figure at a level which would not strike at one particular company and would not, in effect, subsidise another but would attempt to correct the general abuse and, until we can get rid of the initial allowance altogether, affect all companies reasonably equally.
The hon. Member for Shipley (Mr. Hirst) poured great contempt for my hon. Friend's solution on the ground that it would do even greater damage to the Rolls-Royce Company. He was a little dogmatic. It is not very easy to say. It may be that, relatively, it would do less damage, because it would not throw the whole advantage on to a competitor company which might be exceedingly damaging to Rolls-Royce. However, I do not wish to be dogmatic about this.

Mr. Hirst: The right hon. Gentleman is forgetting the enormous differential between the Rolls-Royce, on the one hand, and the other cars to which he has referred, on the other. I still maintain that my point is valid.

Mr. Jay: That is the hon. Gentleman's opinion. There is genuine difference of opinion as to what the effect would be of taking the different levels which have been suggested for the limit.
I should like the Chancellor to look at the suggestions which have been made and to see whether he can achieve what I think is, subject to the general argument which we will, perhaps, have on the Question "That the Clause stand part of the Bill", what most of us want to do, namely, to correct this abuse without doing unnecessary damage to this particularly valuable company.

Mr. Charles A. Howell: It is seldom that I have the opportunity of speaking in this Committee these days, particularly on financial matters on which I could not claim to be an expert. However, the suggestion in the Amendment compared with what is in the Clause intrigues me exceedingly.
First, I was rather intrigued by my hon. Friend the Member for Westhoughton (Mr. J. T. Price) congratulating the Chancellor of the Exchequer on this Clause. It must be unusual to the right hon. and learned Gentleman to hear any hon. Member on this side congratulating him on what is in his Budget. However, I reiterate what my hon. Friend said. Having handed out largesse to the Surtax payers, the wealthiest people, it is rather strange that the right hon. and learned Gentleman should attack them in this way. He kicks the ball one way and then taps the fellow the other. He gives a nice little hand-out to certain people and then gives them a sort of backhanded smack over the tax allowance on cars. However, since he has the courage to do this to people who can well afford to suffer it, I congratulate him. I am only sorry that he has not gone a little further.
8.45 p.m.
It is passing strange that when sitting a little lower down in this Chamber the first job that I have to do is to try to recall the names attached to the faces which I see sitting opposite me. In doing that through The Times handbook, I am struck by the number of directorships which are held by hon. Members opposite. According to what we have been told in the debate, these cars should be used wholly and exclusively for the business. How any director or chairman of directors who has one of these expensive Rolls-Royce cars, bought and maintained by the firm, can in all honesty say that he is using it wholly and exclusively for the firm if he uses it to go to the office, or even backwards and forwards to home, I do not understand. I cannot see how it is possible for any man to say that he is using, say, a Rolls-Royce Silver Wraith, or whatever it may be, exclusively for one firm if at the same time, while he is out, he is working as a director for other companies.

Mr. Michael Shaw: I must remind the hon. Member that where these benefits arise there is the necessity for the director to raise the matter with the Inland Revenue every year and that, in many cases—I have settled many—the amounts concerned are considerable.

Mr. Howell: I accept that, for the simple reason that my hon. Friend the Member for Litchfield and Tamworth (Mr. Snow) indicated how that happens. I do not have the chance—I do not want it—to go to point-to-point meetings. Perhaps my hon. Friend the Member for Lichfield and Tamworth sees these point-to-point meetings. I have, however, seen the county show and one cannot get in the car parks, where the cost is 10s. or £1, because of these big cars.
A lot of the directors who have expense accounts have had a disservice done to them. I congratulate the hon. Member for Shipley (Mr. Hirst). He is one of the first on the benches opposite whom I have heard admit without qualification that we all know about the expense account racket. The horn Member was frank about it. What is more, the Chancellor knows about it, because he made some threatening noises in his Budget speech that, having given these concessions, if the racket did not stop he would do something about it. I have a recollection that Lord Amory, when Chancellor of the Exchequer, said something to that effect in one of his Budgets. Although I have not been a Member of the House anything like as long as the hon. Member for Shipley or the hon. Member for Twickenham (Mr. Gresham Cooke), I am fairly certain that during the last ten years Conservative Chancellors have warned people about these expense rackets. The present Chancellor is the first who has put in even the thin end of the wedge against the expense racket with regard to these cars.
Let us consider the position of a noted baronet whose wife seems to get a gold-plated car every year. One of the things that we are told about a Rolls-Royce is that although the hon. Member for Nottingham, South (Mr. W. Clark) said how much they depreciate in the balance sheet—

Mr. W. Clark: The hon. Member must not misquote me. I am sure he did it unintentionally. I was speaking about the market depreciation, which I compared with the paper depreciation which one gets under the existing initial and annual allowances.

Mr. Howell: When we talk about the market depreciation, surely I am right in speaking of the balance sheet depreciation—

Mr. Clark: Mr. Clark indicated assent.

Mr. Howell: But the car never goes out of the possession of the firm. It must be an asset until the firm sells it. If the market value has depreciated, I should imagine that as an asset, the value of the car in the balance sheet has also been reduced. The hon. Gentleman says, "No." That shows my ignorance. [HON. MEMBERS: "Yes."] Oh, yes, I frankly admit it.

Mr. Charles Loughlin: It is not my hon. Friend's ignorance, but others'.

Mr. Howell: It just shows what ramifications go on in balance sheets. I have had to deal with them as a trade union secretary. If an article became secondhand its value on the balance sheet depreciated. My auditors would not allow me to show the purchase value of something for year after year.
So I think I am quite right in saying that this depreciation of the car goes on the balance sheet, but can anybody tell me how, with all the prestige which Rolls-Royce have—and rightly so—thirteen months after purchase of the Rolls-Royce car we can assess how much it has depreciated in value? We are told that a Rolls-Royce never fails. One can see them doing all sorts of menial tasks in Britain with all sorts of bodies on them. It is not the body with which we are concerned; it is the Rolls-Royce engine.
I do not think for one moment that there was any justification for a certain baronet and his wife having a gold-plated car, a very posh car, on show at the Motor Show every year, for were we not told that it was the lady who was running it about although it was he who was the director? We are told that showing that car year after year was a jolly good advertisement whether

in Britain or by the Mediterranean. If that is the argument, how can we assess what percentage of the value of a car is its value for personal use and how much is in its use solely and exclusively for the business of the firm? It is utterly impossible to do it.
Let us look at another thing. I refer to another firm of which that gentleman used to be the chairman. There are in the firm tradesmen who help to make the industry secure, or at least the products of that industry, whether a Daimler, a B.S.A., or whatever it is. The tradesmen get an allowance. They get an allowance for their tools, but, by Jove, they do not get an allowance like that which those people get for their Rolls-Royces or Daimlers or Bentleys. There as a vast difference.
Perhaps I ought here to declare an interest, having represented railwaymen. Many people do not realise that a railway engine driver, in the employ of the British Transport Commission, which we own, has to provide his own watch. He has to have a watch to make sure his train is keeping time—a thing which hon. Gentlemen opposite often complain about. We have made application year after year for railway engine drivers to be provided with watches. My trade union, along with the associated society, negotiated with the Inland Revenue on behalf of the drivers, and now a driver gets an allowance of 10s. a year in respect of the maintenance of his own watch. There is a very big difference between that allowance and allowances which directors get, with their privileges, although a railway engine driver is doing a good job of work and had plenty of credit given him during the war for the work he did in the difficult conditions of that time, with the blackout and so on.

Mr. Loughlin: Credit, not wages.

Mr. Howell: Let us not minimise the position referred to by the hon. Member for Shipley when he said that these expense allowances are prevalent. They are prevalent even today. I know that now these people have a posh name. They are called sales representatives. Years ago they used to be called travellers. There is hardly a sales representative in the country who does not get a car as part of his perquisites.
I have known many a sales representative who has told me, "I have got a new job. I am now with so-and-so and I get a car provided which I can keep in my own garage and I am entitled to use it for purposes I like".
Somebody said that it was not quite right that he should go on holiday to the seaside in it and that that was an abuse. From the point of view of the Inland Revenue it is an abuse, but I would not like it to be thought that from the point of view of the firm it is an abuse. Many firms provide cars in addition to salaries. They have to do that. They do it for directors. Directors are provided with houses. I remember that it was stated in a Budget debate, I think two years ago, that they are provided with gardeners—

The Temporary Chairman (Mr. H. Hynd): I wish that the hon. Member would come to the Amendment now.

Mr. Howell: I apologise for straying a little. I was trying to show that these expense allowances were all lined up on one level and that it is only one type of people, that is, directors and higher executives, which receives them.
The hon. Member for Twickenham gave as an illustration the fact that back benchers are each allotted a cupboard of about 12 ins. by 18 ins. He said that some people have rooms. I share a room with several others. The hon. Member mentioned that the Chancellor of the Exchequer had his own "posh" room and so did the Prime Minister, but do not let us forget that they also have the use of a motor car. I do not think that there is the slightest abuse of those cars, but it should not be imagined that directors do not use cars to take them home. They are invariably used, but by some stretch of the imagination that is regarded as part of the business of a director. It is passing strange that everybody else has to sign in—all the workers and probably the office staff as well.

Mr. W. Clark: Mr. W. Clark indicated dissent.

Mr. Howell: The hon. Member for Nottingham, South shakes his head, but I know what I am talking about because I have represented people who have to clock in.

The Temporary Chairman: I really must ask the hon. Member to reach the Amendment.

Mr. Howell: I thought that I was reaching the Amendment when I objected to the proposal by the hon. Member for Twickenham to change the sum of £2,000 mentioned in the Clause. I do not think that this change should be made. It is impossible to assess how much a car is used wholly and exclusively for the business of the undertaking and how much for the personal use of a director.

Mr. A. P. Contain: It is quite easy. A log-book is kept and the director is charged for that proportion of the use of the car involved in travelling to and from his office and his home. I am sure that is right from my personal experience.

Mr. Loughlin: An honest director.

Mr. Howell: In accordance with the traditions of the House, I would never challenge a personal statement by an hon. Member. One hon. Member opposite told me that he had a motor car belonging to his firm and also his own car and that on no occasion had he used his firm's car in place of his own car. I accept that, but I am sure that my hon. Friends would doubt whether that is universal practice. It may be among hon. Members.

Mr. Ross: The hon. Member for Twickenham (Mr. Gresham Cooke) admitted in his first speech that this practice was prevalent.

Mr. Howell: The hon. Member for Shipley also said that he knew that this was prevalent.

Mr. Hirst: I was not talking about motor cars but about meals. I think that the hon. Member is straying even more than I was.

Mr. Loughlin: The hon. Member obviously means that there is a higher moral standard in the purchase and use of cars than there is in the purchase of meals.

Mr. Howell: I will not elaborate on that. I have already been in trouble for not keeping to the Amendment. The question is whether the Chancellor is benevolently-minded towards the


Amendment. I am rather worried that having made this honest gesture to reduce what the right hon. and learned Gentleman knows to be an expense racket, he will then allow these firms the full amount of £2,000 if they want to buy these cars.
9.0 p.m.
I do not go all the way with my hon. and learned Friend the Member for Crewe (Mr. Scholefield Allen) in suggesting that the figure should be reduced to £800. It would have been better to have had an Amendment completely negativing the proposal, but I do not know whether that would have been selected.
I have no objection to any firm having these expensive cars if that enhances its prestige and improves its business possibilities and impresses potential customers. It is then a good business proposition, but a proposition which should be paid for out of the firm's profits and not by the taxpayers as a whole. I have noticed no diminution in profits recently and I do not see why the railway engine driver, the bricklayer, the carpenter and the fitter in a factory, who get agreed allowances for Income Tax purposes, should have to contribute towards the cost of these cars.
My home is in Derby and I pay tribute to the Rolls-Royce company for what it has done to the country—the production of Merlin engines for Spitfires and so on. In Derby we were not always too pleased when those engines were being tested because the horrible noise used to wake us up in the middle of the night. However, as good employers, Rolls-Royce were always building baffles and so on to try to minimise the nuisance.
I was therefore rather shocked when I received a circular from Rolls-Royce, as other hon. Members probably did, containing a subtle form of blackmail of hon. Members, saying that if this proposal of the Chancellor's was not withdrawn, the motor car section of Rolls-Royce would go out of existence. That is a shocking piece of propaganda. We are told that 2,400 production cars a year are made by Rolls-Royce and that about half of them go abroad. That means that only half of Rolls-Royce motor car production will be affected.
In a newspaper recently a representative of the motor trade gave details of how long one has to wait before getting delivery of a Rolls-Royce, and I saw that the period was seven or eight months even now—and presumably it is the same for Bentleys and Daimlers. There does not appear to be much threat to the motor car section of Rolls-Royce. The overseas market will not deteriorate as a result of the Chancellor's proposals and there will still be people in this country, outside those using expense accounts who will want these prestige cars for their point-to-point meetings and Ascot and so on.
The Chancellor is clearly aware of the profits which some firms are making and which have prompted him to raise Profits Tax to 12½ per cent., and there is no doubt that because of that he will not be getting the money which would have been paid for these cars, because when a car is bought by a firm there is the cost of the original purchase and the cost of running, and so on, to set against the gross profits. Any firm which thinks that a Rolls-Royce or Bentley or Daimler is necessary for its prestige will not forgo such a car for the sake of another £2,000, £3,000 or £4,000, because it is not necessary to buy such a car every year and the cost can be set against the firm's profits.
The circular is, therefore, only a threat. It is sheer bunk on the part of the Rolls-Royce company to pretend that the factory would have to close down. I can recollect an occasion when the owner of another motor-car company threatened to close his factory and when my party, then in office, said that if he closed it we would open it. I do not expect the Chancellor to say that on behalf of his party, but I am certain that if the Rolls-Royce company decides to give up the motor-car section it will not close it down and write it off. It will obviously attempt to sell it, and, as things are today, with the profits that would be coming from these expensive cars—because, after all, the company does not have to depend on the saleability of Rolls-Royce cars, for that is assured; it chooses the price and the people take it or leave it—I do not think the Amendment will have the slightest effect on the purchase of cars.
It may well be that for a month or two agents will reduce their stocks, and to


that extent, the demand will decline, but I am convinced that even if the Amendment of my hon. and learned Friend the Member for Crewe were accepted by the Chancellor, it would not make the slightest difference to the prestige purchase of these Rolls-Royce cars. I suggest to the Chancellor that he might be fair in this Clause and not rob Peter to pay Paul, because the Clause as he has drafted it is quite good enough for this year, even if it is only the thin end of the wedge.

Mr. Barber: I hope that the Committee will think it appropriate if I accede to the request of the hon. Member for Birmingham, Perry Barr (Mr. C. A. Howell) to indicate at this stage the views of my right hon. and learned Friend on this series of Amendments, the first of which was moved by my hon. Friend the Member for Twickenham (Mr. Gresham Cooke).
As the Committee knows, the purpose of Clause 20 and the two related Clauses is to restrict the tax allowances and deductions on cars costing more than £2,000, and, broadly speaking, they provide that in the computation of any such allowances and deductions any expenditure over £2,000 is to be ignored. These fourteen or more Amendments which we are considering together deal, so far as those in the names of my hon. Friends are concerned, with a proposal to increase the allowances, and, in regard to the Amendment of the hon. and learned Member for Crewe (Mr. Scholefield Allen) to decrease the allowances, in his case from the £2,000 proposed by my right hon. and learned Friend to £800.
If I may take, first, the Amendments in the names of my hon. Friend the Member for Twickenham and others of my hon. Friends, they propose that the £2,000 limit for cars set out in Clauses 20 to 22 should be increased by the amount of the Purchase Tax which has been paid on those cars. At present, the rate of Purchase Tax on passenger cars is 50 per cent. of the wholesale value, so that the Amendment will have two effects. The first will be that, since a purchaser of a car costing £2,000 basic price has to pay £833 in Purchase Tax, these Amendments would, therefore, raise the limit at which the restriction begins to operate from £2,000 to £2,833.

The second effect of this series of Amendments would be that cars costing more than £2,833 would also benefit from the fact that the Purchase Tax had been ignored.
This debate has been marked by two characteristics. The first is that the speeches of the overwhelming majority of Members, while, no doubt, deeply felt, have been extremely moderate in tone. The second characteristic, without any exception, taking the line of my hon. Friend the Member for Twickenham, is that every hon. Member who has spoken in the debate has paid tribute to the Rolls-Royce Company and to the men working in that company. They were absolutely right to do so. The right hon. Member for Battersea, North (Mr. Jay) described the Rolls-Royce as a national asset, and my hon. Friend the Member for Shipley (Mr. Hirst) referred to the car as the best in the world. I doubt whether anybody would disagree.

Mr. Ronald Bell: I want to make sure that we all understand the Amendments in the same way. I understood the Amendment in the name of my hon. Friend the Member for Twickenham (Mr. Gresham Cooke) to refer to the sum of £2,000, together with the Purchase Tax paid at any time in respect of the vehicle concerned, and to be based not on the £2,000, but upon the amount actually paid in respect of the vehicle concerned, including Purchase Tax, which might bring the price up to £6,000.

Mr. Barber: My hon. Friend is quite right. That is why I said that the Amendments would have two effects. I dealt, first, with the question of raising the limit from £2,000 to £2,833, and I went on to explain that there would also be an additional benefit in respect of Purchase Tax for the more expensive cars.
I was pointing out that almost everybody had referred to the Rolls-Royce car. The very fact that this car is renowned throughout the world will ensure that there is no question of the fears of one of my hon. Friends being realised, namely, that the demand will fall so much that the firm will be forced to cease production.

Mr. Harold Wilson: I associate myself with what is being said


about the Rolls-Royce Company, but I hope that some limitation will be placed on this enthusiasm. If we keep on talking in these terms—and Rolls-Royce has been referred to as a national asset—the next thing will be that there is an American take-over bid for the firm.

Mr. Barber: The basis of my right hon. and learned Friend's proposals were clearly stated in his Budget speech, when he said:
I also propose to include in the Finance Bill a Clause limiting the capital allowances that may be granted in respect of ordinary motor cars used by business and professional people to the allowances appropriate to a maximum cost of £2,000 for each car. If business men want to use more expensive cars, I think that it is not unreasonable that they should carry the excess over £2,000 themselves and not pass part of it on to the Exchequer."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 816.]
My hon. Friend the Member for Twickenham, if I heard him correctly, said that my right hon. and learned Friend's proposals were a hard-handed way of dealing with abuses. I must point out that if that is what he said he has misunderstood the purpose of these proposals. It is very important to realise that my right hon. and learned Friend has never suggested that businessmen should not ride about in the more expensive types of motor car. That is entirely a matter for them. All that he has said is that the extent to which the cost of an expensive car can be recouped from the Exchequer should be limited in the way proposed in the Clause.
I do not believe that this will have the effect mentioned by certain hon. Members. We may all have differing views as to the desirability of businessmen riding about in these more expensive types of motor car. I can only say that, speaking personally, I think that it would be a very bad day for this country if those men who, by their business and professional acumen, contribute a great deal to our wealth, ceased to use the more expensive kind of car. I do not believe that this will happen as a result of my right hon. and learned Friend's proposal. What will happen is that some relief will be given to the general body of taxpayers.
My hon. Friend the Member for Shipley asked me whether I could state the amount involved. It will be about £3 million in a full year. As against that,

there will have to be offset some loss in Purchase Tax. I do not believe, and my right hon. and learned Friend does not believe, that this will be very great, but the extent of it must inevitably be a matter of judgment and speculation.
9.15 p.m.
As I think all hon. Members know, the extent to which tax allowances are given in respect of plant varies according to the type of plant. For instance, the normal investment allowance is 20 per cent. For ships, it is 40 per cent., and there is no investment allowance for motor cars. This series of Amendments, which, incidentally, would cost about £1½ million in a full year, runs counter to the general principle of restricting the tax allowances given in respect of cars. What this series of Amendments does is to raise the limit by reference to the amount of Purchase Tax which is payable in respect of the car.
I should like to say two things in respect of the figure of £2,000. First, in one sense any figure must be arbitrary. Indeed, some hon. Members, mostly my hon. Friends, would prefer a higher figure, but there are other hon. Members, like the hon. and learned Member for Crewe, who would prefer a lower figure. This is a matter of judgment, but I assure the Committee—indeed, I would have thought that it would have been obvious—that this figure of £2,000 was decided on by my right hon. and learned Friend after the most careful consideration of what he thought would be reasonable.

Mr. Jay: The hon. Gentleman may be right, but what evidence has he for thinking that this will not have a serious effect on the sale of Rolls-Royce cars? His opinion seems contrary to the opinion held throughout the motor industry.

Mr. Barber: This must be a matter of opinion and judgment, but as this is an opinion concerning demand, I would have thought that it was not an opinion on which only the motor industry would be entitled to express a view.

Mr. Hirst: This is a most outrageous argument. Does my hon. Friend seriously contend that it will undermine Rolls-Royce to find that out? This is a scandalous argument.

Mr. Barber: My hon. Friend takes a different view from myself.

Mr. Hirst: Very definitely.

Mr. Barber: As this is a matter of judgment, I must leave it there.
I was making the point that the figure of £2,000 was decided on by my right hon. and learned Friend after the most careful consideration. The other point of particular significance in relation to these Amendments is that in deciding on the figure of £2,000 the incidence of Purchase Tax was taken into account. I tried to follow the argument of the hon. and learned Member for Crewe, who would like the figure of £2,000 reduced to £800. I am bound to tell him in all honesty that I cannot see how this would help Rolls-Royce. I agree with the point made by my hon. Friend the Member for Shipley that the one consequence would be to reduce the allowance by about £1,200.
If one takes a specific case of a Rolls-Royce car which costs, say, £6,000, and is sold later for £4,000, a difference of £2,000, under the proposal of the hon. and learned Member for Crewe the tax allowances would be reduced by £400 compared with the proposals of my right hon. and learned Friend. In the case of Jaguar cars in similar circumstances, the reduction would be less, and I cannot see how this would be of assistance to Rolls-Royce.
In any event, so far as the Amendments are concerned, it is doubtful whether the method of raising the limit by reference to Purchase Tax would be the right one because it would lead to some strange results. Take the case of two cars which are bought for the same price, one a new car and one a secondhand car which originally cost more than the new car. The greater amount will be liable in respect of the secondhand car than for the new car although the cost to the company would be precisely the same. I do not see how one can avoid this. Under the Amendment, if the company bought a new Aston Martin for £2,000 (basic price), the allowance would be on £2,000 plus Purchase Tax and it would be liable for Purchase Tax of £1,168, giving a total of £3,168.
On a Bentley it would be £2,000 plus the Purchase Tax originally paid on the

total and would probably amount to £4,145. In other words, the additional £1,000 would be allowable in respect of precisely the same deal. If there were a change in the rate of Purchase Tax there would be yet another anomaly. These difficulties are inherent in the way in which my hon. Friends have proceeded. The proposals of my right hon. and learned Friend will have no effect whatever on the allowance on cars costing £2,000 or less and even on the more expensive cars there would still be a substantial allowance.
It has been pointed out that I may inadvertently have misled the Committee in giving the figure of £3 million in a full year as being the amount involved in this Clause. I hope that I did not give the impression that I was referring only to Rolls-Royce for, of course, all cars affected by the Clause would be included. If I gave the contrary impression, I regret it.

Mr. Callaghan: Could the hon. Gentleman tell us how much the Revenue will save as a result of this Clause? Is it £3 million?

Mr. Barber: It would be £3 million in a full year, less—

Mr. Hirst: Less.

Mr. Barber: May I be allowed to answer? It would be £3 million in a full year, less some figure for Purchase Tax less as a result of loss of sales of motor cars. This must inevitably be an opinion. One simply cannot put a figure upon it. Whatever views my hon. Friend may have about the £2,000 and that must be a matter of judgment, the fact is that in deciding on that figure the incidence of Purchase Tax was fully taken into account by my right hon. Friend. Quite apart from that, I think that my hon. Friends will agree from what I have said that the proposals in the Amendment, which would cost £1½ million, would produce some strange anomalies which I cannot believe was their intention. With this in mind, I hope that they will not feel that they should press the Amendments.

Mr. Callaghan: May I ask the Economic Secretary a further question? He has said how much the concession would cost if it were made to his hon. Friends, but I thought it would be useful if he told us how much the taxpayer would save if the Amendment in the


name of my hon. and learned Friend the Member for Crewe (Mr. Scholefield Allen) were accepted.

Mr. Barber: I could not give that figure offhand. It would be between £1½ million and £3 million—[HON. MEMEBERS: "More."]—I am sorry; it would be considerably more. Perhaps, Mr. Hynd, if you will allow me to do so, I may try to obtain the information and give it when we discuss the Motion. "That the Clause stand part of the Bill."

Mr. Callaghan: I should like to follow that point further. In some ways this debate has been the wrong way round. I was astonished to hear that the possible saving to the Revenue is £3 million in connection with this Clause. If that is so, I do not see how anyone can dispute that the Chancellor is right in what he is doing. Let us put it quite bluntly. The taxpayer has been contributing £3 million through the purchase of unnecessary Rolls-Royces—[HON. MEMBERS: "No."]—less a certain amount of Purchase Tax if fewer Rolls-Royces are sold, but neither the hon. Gentleman, the Chancellor, the hon. Member for Shipley (Mr. Hirst) nor myself knows whether any fewer will be sold. This is a pure matter of judgment. The Economic Secretary said so. The hon. Member may disagree with him, but I will not enter into that dispute. The Chancellor of the Exchequer told us that up to the moment the taxpayer has been contributing £3 million a year to purchase these Rolls-Royces—[HON. MEMBERS: "No."]—and every other car over £2,000; I accept the correction.
It is not merely the purchasers of Rolls-Royces who claim in respect of the tools of their trade. The members represented by my hon. Friend the Member for Birmingham, Perry Barr (Mr. Charles A. Howell) also claim. When I had something to do with the Income Tax Department, which is many more years ago than I care to remember, engine drivers used to be given an allowance in respect of the tools of their trade, and to the best of my recollection they were given 10s. or £1 in respect of the watches which they had to carry.

Mr. Charles A. Howell: It was 10s.

Mr. Callaghan: My memory is not as bad as I thought. Let us suppose that an engine driver said to the Inland

Revenue, "I am not content with one of these large tin watches. I shall claim in respect of a diamond-studded watch which cost me £75". Do hon. Members imagine that the Inland Revenue would have given him more than 10s. as allowance? Not on your life.
The debate will have been an eye-opener to many members of trade unions who claim every year in respect of the tools of their trade. In effect, what the people who are purchasing these Rolls-Royces are doing is equivalent to a carpenter saying, "I will claim in respect of a gold-plated saw and a diamond-studded chisel". There is no reason at all why the taxpayer should pay for this in the case of Rolls-Royces any more than he is willing to pay for the saw and the chisel. That seems to me to be the basis of the Chancellor's case. It is right and reasonable that under the Income Tax Act, we should allow a reasonable amount from the gross profits of any company or individual in respect of the tools of the trade. There is no reason at all, however, why we should pay for ostentation, prestige or luxury. If a man wishes for this, let him pay for it himself.
It seems to me that the debate started on entirely the wrong foot in discussing the difficulties of the Rolls-Royce Company. The debate should be about how much the taxpayer should contribute towards the necessary tools of the trade in respect of motor cars. Everyone has paid tribute to the Rolls-Royce Company, and there is no need to gild the lily. If there is a special case in respect of Rolls-Royce, it should be dealt with differently and not by giving a special concession in the Finance Act or the Income Tax Act, calling upon the taxpayer to pay something which is unjust and unnecessary.
My constituents would be astonished if they heard the degree of morality which has been displayed about this Amendment, particularly by the hon. Member for Shipley (Mr. Hirst). It reinforces a growing belief in the country that the only people who pay the amount of Income Tax which they ought to pay are those assessed on P.A.Y.E. and Schedule E and that any other tax paid is purely voluntary, depending on the degree of integrity of the person concerned.
I am glad to say that there are many people who were brought up in the tradition that it was a good thing to have a


considerable degree of integrity about the payment of one's taxes. The hon. Member for Shipley made a disgraceful speech. He was not only condoning this; he was saying that it is the accepted practice of industry. Not only do they expect the Chancellor and the taxpayer to pay for ostentation and luxury but they also expect there to be a degree of fiddling—I use his own word—which was certainly unknown 20 or 30 years ago, and apparently his side of industry is quite ready to accept it. It was a disgraceful speech to make. The hon. Gentleman will not succeed in waving me down. If he wishes to interrupt, I will gladly give way to him.

9.30 p.m.

Mr. Hirst: I do wish to interrupt the hon. Gentleman. I never used the word "fiddling" in my speech. My speech was intended to be a personal attack on this proposal and the effect it will have on Rolls-Royce. That was my only point. The hon. Gentleman has no right to infer anything else.

Mr. Callaghan: I wish to withdraw The hon. Gentleman did not say "fiddle". He said "racket".

Mr. Hirst: Not in regard to cars.

Mr. Callaghan: The hon. Member did say that.

Mr. Hirst: I did not.

Mr. Callaghan: We shall see tomorrow what the word was. The hon. Gentleman may regret it now and may feel that he went too far in blurting out the truth.

Mr. Hirst: No.

Mr. Callaghan: The hon. Gentleman does not feel that he went too far in blurting out the truth. In that case I do not see why he should disagree with me. There is a great deal of taxpaying among many members of the community today which is voluntary and outside Schedule E. I support the Chancellor in this. The country would be astonished to know that they have been contributing £3 million a year towards this wholly unnecessary expenditure. The Chancellor has done well so far. Next year he should go a great deal further in the matter of making firms pay for their cars than he has gone this year.

Mr. Ronald Bell: The only part of the speech of the hon. Member for Cardiff, South-East (Mr. Callaghan) with which I agree was his statement that this was not, or ought not to be, primarily a debate about the situation of Rolls-Royce. It should be a debate about whether it is right to make this change in the tax law, due regard being paid to equity. I could not help feeling that he completely destroyed his case when he referred to the railwayman and his watch. He said that if an engine driver tried to claim for a gold watch the Revenue would sweep the claim aside and restrict him to 10s. That is exactly the point. In order to make out a claim for expenses, it must be shown that the expenses are solely and necessarily incurred for the purposes of the business. Because the engine driver would fail to show that a diamond studded watch was necessary for him to drive his engine efficiently, he would fail to substantiate his claim.
In exactly the same way, under the present law if a business man—I am not in that category myself—were to claim that a Rolls-Royce was a necessary expense solely incurred for the purposes of his business, the Revenue would be fully entitled to challenge it and say, "A modest car will serve the purposes of your business adequately. If you think we are wrong and that you need a Rolls-Royce, you can appeal to the General Commissioners".

Mr. Ross: Does the hon. Member appreciate the meaning of the Clause, which deals with capital allowances for machinery and plant and not business expenses?

Mr. Bell: The hon. Gentleman is debating the definition of "business", which strikes me as slightly detached from reality. We are talking about allowances for passenger motor cars. [HON. MEMBERS: "No."] All the time I have been sitting in the Committee the debate has been about allowances on Rolls-Royce motor cars.

Mr. Callaghan: Subsection (1) refers to
Chapter II of Part X of the Act of 1952 (capital allowances for machinery and plant)
That is what we are discussing. Because Rolls-Royces are wrongly treated as


machinery and plant, we have got our selves into the position where the tax payer pays £3 million a year towards them.

Mr. Bell: I had realised that the hon. Member for Cardiff, South-East and some of his hon. Friends were a long way from the point when they made their speeches, but I never dreamed until that interruption how far away from the point they were.
Sir William, your predecessor in the Chair was very kind. The intention was that we should have a general debate upon these matters. That is why many things were allowed to be said. But the whole point at issue on the two sets of Amendments is simply whether £2,000 should be established as the limit for capital allowances on motor cars or whether it should be some other—and if so what—figure. That is what we are talking about, and that is what the hon. Member for Cardiff, South-East dealt with.
Under the present Income Tax law, if the taxpayer claiming for a more than £2,000 motor car has his claim disallowed as not being a proper business expense, he can go through the ordinary procedure of tax appeals. He can take his case to the High Court—and, indeed, to the House of Lords, if he so wishes. That is the present situation. He has to prove that a Rolls-Royce motor car is necessary for the earning of profits.
The hon. Member for Birmingham, Perry Barr (Mr. Charles A. Howell) said that in certain cases where prestige was essential to the success of the business he accepted that the purchase of a Rolls-Royce or a Bentley might be a proper business expense. If that is so, why should the taxpayer who is able to discharge the burden of proof placed on him by the Income Tax law of showing it to be a necessary expense be debarred from claiming it as an expense and, instead, be told that he must be taxed on it—

Mr. Callaghan: Because we are not a charity.

Mr. Bell: The hon. Gentleman says "Because we are not a charity", but what has this to do with charity? If expenses are necessarily incurred in the conduct of a business, if they have to be incurred, and are properly incurred, they are not part of the profits and should not

be taxed. It is absolute tendentious political nonsense for the hon. Member for Cardiff, South-East to say that the taxpayer has been paying for these motor cars—

Mr. J. T. Price: Before the hon. Member follows this line of country any further, I would remind him that we on this side of the Committee are defending the Chancellor's action in seeking to put a brake on the racket. We are not attacking the Treasury Bench—we are defending it. The hon. Member for Buckinghamshire, South (Mr. Ronald Bell) is scratching in the wrong pen. We are defending the Chancellor. We are also complaining that he has not done enough, and are encouraging him to be more bold and forthright.

Mr. Bell: The hon. Member really fell a little below the standards which, during a long time in this House, I have come to expect—

Mr. Callaghan: If the hon. Gentleman cannot think of a better answer—

Mr. Bell: I cannot think of any answer that would be suitable to that intervention.
We are debating something that is serious in two ways, and this is where the effect on Rolls-Royce comes in. It is serious because we are doing something, not on grounds of equity but of prejudice. This step is ill-taken by the Chancellor, and should not have been taken. To some extent, it is playing to the gallery. We all know that there have been, and are, abuses in the computation and claiming of business expenses. There are abuses throughout human life, and there are abuses in this department of it. This, however, is not the logical reaction to those abuses.
The right reaction is for tax inspectors to disallow more claims which they think are inflated. Where they think that a Rolls-Royce or other car costing more than £2,000 is not appropriate to the circumstances of that business they should carry their objection through the courts. They should fight. This present reaction is an illogical one, and I regret that this proposal should have been made, because its effect on the Rolls-Royce Company will be more serious than my hon. Friend the Economic Secretary appeared to indicate.
I am aware of all the arguments about it being only the expense account market that will be affected, but I believe that the motor car division of the Rolls-Royce Company probably operates on no profit at all and is run largely as a prestige adjunct to the company's other profitable activities. Therefore, even if a half of the market is seriously affected, it will make all the difference in the world between carrying on that division of the company at a loss and not carrying it on at all.
It is for genuine reasons that I am adducing this argument, since I have no shares in the Rolls-Royce Company, I do not own a Rolls-Royce and I see no prospect of owning one. Since I have mentioned that this is not one of the major profitable activities of the company, it cannot be expected to go on manufacturing these cars at a loss and the Government cannot, in this case, expect to aid the export of these vehicles by knocking away a part of the home market.
I do not accept the wording of the Amendment in the name of my hon. Friend the Member for Twickenham (Mr. Gresham Cooke). As the Economic Secretary explained, there are grave defects and difficulties in the series of Amendments my hon. Friend proposes. It may be that my hon. Friend has put them forward as an expression of his point of view, to indicate the possible damage that may be caused to the motor car industry and the irrelevance and injustice of the remedy that is being proposed.
I urge the Chancellor to bear in mind the anxiety and dissatisfaction of some of his hon. Friends about this matter, who do not like this way of reacting to an abuse, the existence of which all hon. Members recognise. I hope, therefore, that he will decide to drop this proposal altogether.

Mr. Gresham Cooke: We have had a very full debate on my proposed Amendment to this Clause. The discussion has gone rather wider than I had anticipated. I think that every hon. Member who has spoken has paid tribute to the Rolls-Royce Company and I must point out that I moved the Amendment because I was rather fearful for the future of Rolls-Royce. The

Economic Secretary, however, has taken a more optimistic view of that future than have I. I only hope that he is right. I beg to ask leave to withdraw the Amendment.

Hon. Members: No.

Amendment negatived.

Motion made, and Question proposed, That the Clause stand part of the Bill.

Mr. Jay: It is now appropriate for hon. Members to take a serious look at the matter of capital allowances for cars. I believe that the Chancellor has not gone nearly far enough in getting rid of this abuse. I suggest that what he really should do is to get rid of the initial allowance for passenger motor cars as soon as possible.
So far as passenger cars are used for business purposes—and some of them are—the ordinary depreciation allowance should apply. I invite the Chancellor to listen to the arguments I am endeavouring to put forward, because I have endeavoured to put them to six Chancellors in the last ten years and as soon as they seem to understand the subject they pass on and cease to be Chancellors.

The Chancellor of the Exchequer (Mr. Selwyn Lloyd): That includes the Leader of the Opposition.

Mr. Jay: Yes, it does.
The whole of this abuse arose when the initial allowance was introduced in 1946, and was intended to apply to plant and machinery. It was not the intention of the Chancellor at that time—and it was not, I think, realised outside the Inland Revenue—that this special initial allowance would be applied to passenger cars.
I expect that the Chancellor realises that, when the arguments at the end of the war were worked out and accepted for having a special allowance of this kind, what everybody had in mind were mechanised foundries, horizontal looms and the general re-equipment of British industry. However, because, according to the normal practice of the Inland Revenue, a car used for business purposes counts as plant and machinery, it happened, without anybody's very conscious decision, that cars used in this way began to enjoy the advantages not merely of the ordinary depreciation


allowance, but of the special initial allowance intended as an assistance in the re-equipment of British industry.
9.45 p.m.
This has always been an anomaly and an abuse. It might not have mattered very much if it had been small in extent. The figure we have been given today of £3 million in respect of cars over this figure alone confirms the suggestion one often hears that the total revenue which the Exchequer is losing by applying the initial allowance to passenger cars is between £50 million and £60 million. Therefore, this rather abstruse point as a matter of argument really relates to a very substantial amount of revenue.
No doubt the Chancellor knows that the Inland Revenue has always used two arguments to oppose the suggestion that the initial allowance should no longer apply. The first has always been that, if the car is used for business purposes, it is equipment, tools of the trade, and no special argument to exclude it can be sustained. That argument, however, was abandoned by the present Home Secretary when, as Chancellor, he introduced the investment allowance and implicitly, if not explicitly, responded to the argument we had used in the three previous years, excluding passenger motor cars from the investment allowance. By doing that, he really admitted the principle that it is practicable to distinguish between other types of plant and machinery, on the one hand, and passenger motor cars, on the other.
The present Chancellor has reinforced the argument this year, because, by the very decision to which hon. Members object, to have a set limit of capital allowances for passenger cars but not for tools of the trade, he admits that it is perfectly possible to make the distinction. Therefore, I think that no one can seriously contend now that it is impossible to abolish the abuse because one cannot make a distinction between ordinary industrial plant and machinery and passenger cars used for business. We need hear no more about that.
In passing, I may say that the present Prime Minister's argument in favour of retaining the initial allowance was that the motor car industry at that time was going through a slump. I think that that was about 1954, when the right hon.

Gentleman was Chancellor. He thought that there might be a good case for making a change, but the moment to do so was not when the industry was suffering a recession. No doubt, there is some force in that.
The argument of Lord Amory, the second argument which the Inland Revenue has used, was that, if one were to take away the advantage of the initial allowance from passenger cars altogether, it would hit particularly hard certain deserving classes of person who inevitably and genuinely use cars for their business. The type of people always referred to in this connection are doctors, midwives, district nurses in country areas, and so on. But for this reason that seems to me a weak argument. I do not think that Lord Amory, when using that argument, realised that, even if one ceased to apply the initial allowance to such cars, it would still apply, in so far as they were used for professional purposes, to the ordinary depreciation allowance.
I suggest to the Chancellor that the proper solution for passenger cars as opposed to other forms of plant and machinery is to take away the initial allowance and to apply the ordinary depreciation or wear-and-tear allowance in so far as they are genuinely used for business or professional purposes. That would be valid and it would admit what has always been true, namely, that the argument of 1945 and 1946 for having a special initial allowance, which is really an interest-free loan to the firm, in addition to the old depreciation allowance was relevant and valid for the special purpose of the re-equipment of plant and machinery in industry. We should now cease to apply this to motor cars. This would get rid of the abuse about which my hon. Friends have been, quite rightly, complaining.
I do not suggest that the Chancellor can do all this in a hurry or that he can do it this year. I agree with what he said about my right hon. Friend the Leader of the Opposition. This is an error which has been made by Chancellors of all parties since the war None of them has been willing to admit that it was an error, and the longer we have gone on, the more difficult it has been to get rid of the abuse. It appears that £50 to £70 million is involved. I ask


the right hon. and learned Gentleman to consider this matter very carefully and to keep clearly in his mind the distinction—to do him credit, I am sure that it will be clearly in his mind—between the ordinary depreciation allowance, on the one hand and the special advantage of the initial allowance, on the other.

Mr. Ronald Bell: I agree with what the right hon. Gentleman has said about the initial allowance and going over to the depreciation allowance. It is a very good point. But why will that do away with the abuse? I do not follow it.

Mr. Jay: The hon. Gentleman realises that, because the initial allowance is, in effect, an interest-free loan to the firm, at any given time the firm is better off than if there had been no initial allowance. This was the whole purpose of the exercise. That is why the Treasury would lose a great deal of revenue. As my hon. Friends have rightly pointed out, it means that the car is being paid for, to a certain extent, at the expense of the taxpayer, That is precisely why there is an abuse. If we got rid of the initial allowance, it would correct the main abuse.

Sir E. Boyle: I am not sure how far I should be in order in following what the right hon. Member for Battersea, North (Mr. Jay) has said, but I will give him two brief replies to his remarks. [Interruption.] I do not propose to turn anything down. I will merely answer the right hon. Gentleman's remarks in two respects.
I do not think that anyone disputes that vehicles are not wholly satisfactorily classed either as consumer goods or investment goods. We recognise that. As the right hon. Gentleman has correctly said, an initial allowance is given in respect of oars, but not an investment allowance. Being an Oxford man, he will know that it is like the case of the ashes of Frederic Harrison, the positivist philosopher, which could be put, not in Wadham College Chapel, but in the Ante-Chapel. This may not at first sight seem absolutely logical.
The first answer that I would give to the right hon. Gentleman is that it is largely because we realise that vehicles are not easy to classify satisfactorily in either class that my right hon. Friend is

taking powers in the Clause to limit the sum in respect of which capital allowances can be claimed. That is the whole basis of and case for this Clause.
Secondly, the right hon. Gentleman has attributed a slightly exaggerated importance to the question of the initial allowance on cars taken on its own merits. There would be little point in simply getting rid of the initial allowance on cars. If we were to do that, it would have little effect, because it would do no more than postpone the capital reliefs. I do not want to close any doors to the future, but I undertake that within the next few days I will send the right hon. Gentleman a fairly elementary table of figures, which will show him that this is so.
Approximately speaking, under our present system when an initial allowance is drawn for motor cars, within six years the value of the car is written down to about 10 per cent. of its initial value. If we did not have an initial allowance for cars, exactly the same thing would happen with our present capital allowances after about eight years. The right hon. Gentleman attributes too much significance to the point. Rather than pursue it further with him in argument on the Clause, however, the best thing I can do is to send him a table which will illustrate the point, so that there can at least be a two-way method of education on this subject. Otherwise, I do not think that there is anything I need add to the general case for the Clause which has not already been put by my hon. Friend the Economic Secretary in the debate on the preceding Amendment.

Mr. Jay: Would not the Financial Secretary agree that when the Government introduce at any time an initial allowance, whether on all plant or machinery or on vehicles, in the first year they lose a quite considerable amount of revenue and that this shows that at any given point, so far as the initial allowance is in existence, the taxpayer is better off and the Exchequer is worse off?

Sir E. Boyle: Certainly, I will consider that aspect. The right hon. Gentleman is justified in pointing out, as was often pointed out years ago in our debates on the initial allowance, that firms are buying new cars all the time and there


is always a sum outstanding. I was merely making the point that it must be remembered that, in the case of cars, one could exaggerate the difference between having an initial allowance and not having an initial allowance.

Mr. W. F. Deedes: I wish to make only one small point. I have no desire to enter into the main argument, which has already been discussed. My right hon. and learned Friend the Chancellor of the Exchequer will appreciate that this is a subject on which strong feelings will be generated and on which they may continue to be expressed for some time. In that connection, I raise only one point, which to my right hon. and learned Friend may seem trifling although I hope that he will not so regard it.
It is important that as a consequence of the Clause regard should be paid to the future choice and use of cars at the disposal of the Government and members of the Government. I am wholly in favour of giving all the necessary facilities to Ministers and to everybody else associated with public business, and there should be no trifling about the price of a motor car being exactly above or below the £2,000 mark. I suggest, however, that this is an aspect of the Clause which might be given close attention and in which it is important to be over-scrupulous rather than under-scrupulous. I hope that that may be noticed in the right quarter in respect of what may happen to the Government pool of cars.

Mr. Selwyn Lloyd: I quite agree with what my hon. Friend has said.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 21 ordered to stand part of the Bill.

Clause 22.—(LIMIT ON DEDUCTIONS, ETC., FOR HIRING CARS.)

Motion made, and Question proposed, That the Clause stand part of the Bill.

10.0 p.m.

Mr. Ronald Bell: I wonder whether this Clause will apply to the hiring of vehicles by companies. Surely it will restrict the claim which they can make on even the casual hiring of a Rolls-Royce car for a special occasion. That

is my understanding, but I may be mistaken. As I understand, the exceptions made in Clause 23 do not cover this point. If a company which owns a cheaper car, nevertheless, for a special occasion, thinks it expedient and proper for the purposes of its business to hire an expensive car it would not be entitled to claim the cost of hiring it, but only such proportion of the cost of hiring it as is governed by the difference between the cost of the car hire and £2,000. It is a really complicated provision, but that is as I understand it.
I wonder whether I may ask another question which is really germane to these three Clauses, and that is whether there is an element of retrospection in them, whether they apply, for example, to the annual depreciation of a car costing more than £2,000—

The Deputy-Chairman (Major Sir William Anstruther-Gray): Order. I hope that the hon. Member will not broaden the course of the debate to include the three Clauses. We are concerned now only with Clause 22. The other two have been passed.

Mr. Ronald Bell: I appreciate that, Sir William. The point I was making about the element of retrospection was really one of a general character. I certainly will not pursue it if you think it has no application to this Clause. Perhaps my hon. Friend could indicate whether this is so or not.

Sir E. Boyle: The point which my hon. Friend has just raised comes more properly, I think, on Clause 23.
As to the question of casual hiring, we shall see how this works out in practice. Representations have been made to my right hon. and learned Friend about this matter. I would rather say nothing more at the moment, but we shall see how it works out in practice and whether any further action is required. I would rather not go beyond saying that tonight.

Mr. Ronald Bell: I am grateful, of course, for that, but if there is some doubt as to the meaning of this, and if I am right in thinking that it does apply to casual hiring on special occasions when a company thinks it a proper and necessary expense to hire a car for its business, could my hon. Friend give


consideration to that between now and Report, to see whether an amendment should be made to the law, because if I am right in thinking it does apply to casual hiring, then, after all, we are really leaving to administrative discretion what should not be to administrative discretion at all, but should be stated in the Bill itself?

Sir E. Boyle: My hon. Friend's description of how the Clause operates is perfectly correct. I cannot, on behalf of my right hon. and learned Friend, give any undertaking to put down an Amendment about this, but we will certainly look at the matter between now and Report.

Mr. Diamond: In view of what has just been said, I think that I had better say a few words which I would not have otherwise bothered to address to the Committee. It will be recollected that Budget day was 17th April. I have in my hand an advertisement which appeared in The Times on 20th April; that is to say, it must have been inserted within two days following the Budget.
It starts off:
Rolls-Royce, Bentley, Daimler, Cadillac, Buick, Chevrolet, Pontiac, Oldsmobile, Aston Martin, Alvis.
It fairly makes one lick one's lips to pronounce the names of these delightful cars. It goes on:
New or used. This is the moment to consider contract hire, now the most beneficial form of business transport.
It took precisely two days for this enterprising private enterprise firm to look at the Budget speech and to draw attention to the fact, the attention of everybody who read the advertisement in The Times, that this contract hire was the way out of the provisions which the Chancellor had announced in the Budget restricting the purchase of cars or the use of bought cars for business purposes. The way out was to hire a car.
Unless we have a Clause of this kind, and a very stiff Clause of this kind—that is the only reason I am delaying the Committee for this one minute—we shall have more and more enterprising advertisements appearing and, as some hon. Member said, driving a Rolls-Royce

completely through the provisions of this Clause.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 23.—(SUPPLEMENTARY PROVISIONS RELATING TO THREE FOREGOING SECTIONS.)

Mr. Alan Green: I beg to move, in page 18, line 28, at the end to insert:
nor where a vehicle is acquired for the purpose of testing it or its components".

The Deputy-Chairman: We can take with this the Amendment in page 18, line 25, to leave out from "apply" to "wholly" in line 26 and to insert:
to either the person carrying on the trade or the person incurring the expenditure on hiring where the vehicle is used or to vehicles acquired for the purpose of testing such vehicles or component parts or equipment for those or similar vehicles".

Mr. Green: Clause 23 (2), to which we seek to add these words, is itself written so clearly and definitely that we felt that these additional words should be used, because we are sure that it was not intended to exclude a vehicle acquired for the purpose of testing it or its components.

Sir E. Boyle: This is a point of which my right hon. and learned Friend has already taken delivery. In view of our discussions I should like to make it plain that my right hon. and learned Friend has no intention of permitting any wrecking Amendment to the Clause, but here there is no question of a wrecking Amendment and I agree that one has to look at the position of traders who buy cars for the testing of their own products. This is a matter which my right hon. and learned Friend will consider carefully between now and Report. It is a small and definite matter which he recognises he should look at.

Mr. Green: With that assurance, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Motion made, and Question proposed, That the Clause stand part of the Bill.

Mr. Diamond: Subsection (3) refers to the date on which these provisions shall apply. It says that
References in the three foregoing sections to expenditure incurred on the provision or


hiring of a vehicle do not include references to expenditure incurred before the seventeenth day of April, nineteen hundred and sixty-one".
That is a perfectly reasonable provision.
But the subsection goes on to add:
or (on or after that day) under a contract entered into before that day.
Nobody wants retrospective legislation and, equally, nobody wants to be foolishly generous the other way round, and there are many contracts under which a person undertakes to buy a car and then, after a certain period, to buy a replacement for that car, and so on. A contract of that kind can run, as far as I can see, for years and years. There are many varieties of contracts relating to the buying and using of motor cars on a replacement basis.
One can well understand that if a contract is entered into to buy a car before the relevant date mentioned in the Clause, and the car is delivered a few days later, and the purchaser pays the price a few days later, one would not necessarily want the purchaser to be caught by the Clause, though when we are dealing with Customs and Excise provisions we do not make regulations like this. The day the curtain falls and the announcement is made, that is it; and there is no attempt to protect a person who has contracted to buy goods which may be varied in price by Purchase Tax or other duty as a result of the Finance Bill. I should prefer to see no provision of this kind and to leave the matter to the simple normal course when buying a car, the relevant date being the date when the car was bought.
It may be alleged that there is some undue hardship, but I cannot believe that there is, when a person has undertaken to buy a car knowing that the Chancellor of the Exchequer would share the cost with him, but then realising that the Chancellor will bear only part of the cost as limited by the previous Clause and not wishing to carry on with his purchase. I do not believe that that is likely to happen, and the Government do not believe so. They have told us that they do not believe that Rolls-Royce is likely to be seriously prejudiced by the provisions which we passed earlier.
I repeat that the simplest way to deal with this matter would be to exclude completely any reference to anything

other than ordinary purchase, the date when the expenditure is incurred, but, if the Government are not prepared to meet me on that, are they not prepared to look at the other case which I have brought to their attention, in which a contract can go on year after year?
The very thing which the Committee and the Government are anxious to do can be frustrated because of the desire of the car user and the car selling firm with which he has made an arrangement—it is not collusion, but as a matter of convenience between the two—which can go on for a very long time.
As I have mentioned collusion, I am sure that the Government are aware that it is very simple to have a contract for the purchase of a car, a contract which, unfortunately, is not dated at the time it is entered into. If somebody decides to go to the car salesman and say, "This contract was made last week, was it not, old man?", the answer is "Certainly, old boy." If there is a fairly substantial commission involved, and it is a fairly substantial car, that is obviously a method which would occur to some people in the trade, provided that it was not going back too far. I repeat that a provision for contract opens a loophole of that kind and might open a continuing contract over a very long time. I hope that the Government will look into that possibility.

Mr. Ronald Bell: I am wondering about the position of the Rolls-Royce Company itself, or its subsidiary companies, because the words which my hon. Friend has been talking about are not "bought" or "sold" but:
expenditure incurred on the provision of the vehicle".
For example, Clause 21, which is governed by this Clause, says:
In determining what amount…is allowable…for the purposes of a management expenses claim…
Does this mean, for example, that Rolls-Royce, or one of its subsidiaries, which would be a separate legal person, has to use the cars of its rivals or else have only two-thirds of the value which is allowed in its management expenses claim or in the writing off for Income Tax purposes of the value of the motor car? It would be extremely harsh if


Rolls-Royce or one of its associated companies could not use its own motor cars without incurring that penalty.

Mr. Harold Lever: I am sorry that I missed a good deal of this debate, but I am sure that I have not missed a passionate defence by hon. Members opposite of Rolls-Royce car owners, because it is obvious that nobody has a great deal of sympathy with anyone who is so foolish, distinguished or rich as to be able to afford "the best car in the world". Clearly, no spokesman on his behalf is likely to be heard here, or in any democratic assembly such as Conservative back benchers.
I am reminded that several years ago, when the Labour Government were in office, I was urging on the then Chancellor, the late Sir Stafford Cripps, that he should end petrol rationing by taxing petrol so that it was rationed by the purse. As I spoke, apart from the considerable indignation which surrounded me on my own side of the Committee, quite understandably, the hon. Member for Eastbourne (Sir C. Taylor) grew redder and redder with indignation and finally could restrain himself no longer and indignantly demanded, "Call that Socialism?". I now feel tempted to return the compliment when a Conservative Chancellor presents an oppressive and somewhat unargued case for preventing people from spending more than £2,000 on a Rolls-Royce. Apparently, everybody concedes that his attack is on the Rolls-Royce and Bentley car owners who seek to charge the cost to expenses. If hon. Members opposite do not stand for the defence of Rolls-Royce, what do they stand for? One does not know of a coherent, economic or political principle that holds the Conservative Party together, except the simple desire for office.
10.15 p.m.
I am not going to suggest that the taxpayer should finance the activities of those who enjoy driving Rolls-Royce or Bentley cars, but I am somewhat surprised that the Committee has not made more comment upon the utterly unprincipled nature of these provisions, which are in a number of pages of almost incomprehensible prose.

The Deputy-Chairman: Order. We are debating Clause 23, and that occupies only one page, not a number of pages.

Mr. Lever: But Clause 23 brings into operation the three preceding Clauses which have not been compressed, as you suggest, Sir William. The effect of this is that the Government have suggested that the Committee should divert its mind from the question of what is a reasonable expense into a piece of Conservative Party Central Office demagogy designed to divert attention from logical expenditure and the question of expenses on to the anomalous one of the somewhat squalid envy of those who have Rolls-Royce and Bentley cars.
I do not accept these partial anomalies and the unargued case for restriction of particular expenditure. I think that the whole problem ought to have been tackled in a proper and logical way. It seems to me that we are diverting public attention from the real question, which is that firms should be allowed, as expenditure against their trading profits, reasonable expenses only. As a matter of fact, for some trades cars exceeding £2,000 could be of considerable value and could be a reasonable expenditure. If the hon. Members on the Front Bench wish to support me in what I am saying, I am ready to give way. I have no doubt that the Financial Secretary to the Treasury has a very extensive reply, closely woven and reasoned, to offer to the Committee as soon as I sit down.
It seems to me that the Government are drawing attention to one particular form of expenditure, and, even when it is reasonably justifiable, it is penalised and rejected, whereas the vast and significant expenditure is completely untouched. I do not like to see this partial and unprincipled method of doing things, especially as it has been argued that it might cause industrial damage. There should be a general principle applicable to all forms of expenditure, and not merely to expenditure relating to the purchase of motor cars.
A good deal of expenditure on motor oars at any level is often unjustified. It may be that a £1,000 car is not a reasonable expenditure, but a £5,000 car in another case may be a very reasonable trade expenditure. I should like to know why the Government feel able to press upon the Committee this partial and


illogical form of a curb on expenditure, unless it is to divert attention from the case for a more logical approach to trade expenses generally. I register my dissatisfaction with the approach of the Government, even though in some sense welcoming the fact that luxurious expenditure, not directly attributable to trade, is caught by this Clause. The way in which this is achieved is one that cannot be defended, because it is demogogic in origin and relies more upon envy than upon logic. I feel that the Government could have done a great deal better if they had made a more general and logical approach to the problem.

Mr. Mitchison: We had a very interesting discussion on the question of expenses generally under Clause 11, and this is not the hour or the occasion to revert to it. We are now discussing the supplementary provisions relating to the three foregoing Clauses, and I have risen to ask the Government to pay serious attention to the question raised by my hon. Friend the Member for Gloucester (Mr. Diamond). It arises here under subsection (3) and it is in that connection that I am talking about it, but similar questions arise from time to time in connection with other provisions of this sort, and in all cases, as in this one, the Government have to make up their mind where they will draw the line and for what reasons. In this case they have excluded from the three foregoing Clauses, first, all expenditure incurred before 17th April and, secondly, expenditure incurred at any time under a contract entered into before that date.
That last provision seems to me to be a loose one, which is wrong in principle. As I understand it, we reckon a man's income to be the income he receives during a given year, and for the purpose of arriving at that income and making deductions from it we deal with the actual expenditure during the year. At any rate, we do so in principle. It is possible to search curiously through the provisions of the Income Tax Acts and among the many odd things that can be found there there may be some exceptions, but there is no doubt that the governing principle is the expenditure and not the contract. In those circumstances, to couple the two things and to proceed on the basis of what I would call the

exceptions, if not the loopholes to what we are trying to do, seems profoundly illogical and quite wrong. I regard expenditure as the right test.
If we simply have the words "a contract" we are dealing with various possibilities. There may be all kinds of contracts—and there are—relating to just the question of the provision of motor cars for what is called trade use. There are long-term arrangements and there are short-term arrangments; there are hirings and purchases, and almost everything else between. It has required three full Clauses to deal, even within the limits of the Bill, with all the possibilities.
I do not think that the Government would be wise to say that they had exhausted the whole story, and if they leave in this provision about a contract they will find themselves supporting expenditure, to the extent that they do not apply this provision to it, which may or may not be meritorious. The right thing to do in a case of this kind is to draw the line quite firmly at the expenditure itself and the date at which that expenditure was incurred, and not get involved in questions of previous contracts. It is not that I am strongly against retrospective legislation on this issue, but on the whole it is right that we should go by the date of the expenditure and not import general provisions about contracts into the kind of case which is capable of so many varieties of contracts, with or without particular merit, in the circumstances of the case.
I earnestly hope that the hon. Member will tell us that his right hon. and learned Friend will give serious consideration to this point and introduce some sort of provision on Report, preferably eliminating references to contracts. If the reference is to be kept in, there clearly ought to be a specific definition of the kind of contract and the circumstances under which it was made.

Sir E. Boyle: It has been nice to welcome the hon. Member for Manchester, Cheetham (Mr. H. Lever), but I should like to explain to him that Clauses 20 to 23 are not concerned with expenses, but with capital allowances, and the Clause we are now discussing relates only to the interpretation of Clauses 21 to 22 which contain supplementary provisions.

Mr. H. Lever: I do not want to unnecessarily interrupt the hon. Gentleman so early in his speech, but in referring to a trading expense I was using popular language to explain the effect of it. The fact that this capital allowance is disallowed reduces the amount of the expenditure which can be charged against trading profits. The second point is that the Clause defines the area of operation of the three preceding Clauses.

Sir E. Boyle: I recognise that, but I was concerned to point out the scope of the Clause.
The hon. Member for Gloucester (Mr. Diamond) raised an important point. He gave, as it were, notice of the point by tabling an Amendment which was not selected. My right hon. and learned Friend will look at this point before the next stage of the Bill, but I think that there are two things which the hon. Gentleman ought to bear in mind.
First, in the past, when we have suspended a capital allowance, we have always borne in mind this point about contracts. For instance, when the right hon. Gentleman the Leader of the Opposition, in 1951, gave a year's notice of the suspension of the initial allowance, he put forward—I remember that we discussed it late at night—a Government Amendment which retained the initial allowance for ships under construction or contract on 10th April, 1951. Again, the present Prime Minister when he suspended the investment allowance in 1956 made a saving for expenditure payable under a contract made on or before 17th February, 1956. There, is therefore, good precedent for the way we propose to act.
I think that there is a practical point which one ought to remember. Whether the expenditure on a car is on hire or on purchase, it would surely be unreasonable at first sight to impose the new limitation on someone who contracted to incur the outlay when no one could have foreseen that these Clauses would be introduced, and who may render himself liable to pay damages for breach of contract if he avoids the expenditure.
I think that it is unlikely that my right hon. and learned Friend will feel that he should make no reference to "contract" in this Clause, but I give the hon. Gentleman an undertaking, without any commitment to the future, that we will look at the wording of this to see whether in any way an alteration should be made. I think that it is unlikely that my right hon. and learned Friend will agree not to make any reference to contract, but we will look at the wording of the subsection.
My hon. Friend the Member for Buckinghamshire, South (Mr. Ronald Bell) asked about the case of a subsidiary company. For the purpose of this Clause, a subsidiary company is in the same position as any person outside. Everyone is in the same position with regard to the impact of the Clause.

Mr. Ronald Bell: Rolls-Royce will be under this disability if it uses its own motor cars and tries to charge that as management expenses. It must buy a cheap car to do it. Is that the position?

Sir E. Boyle: These Clauses make their impact on everybody equally. So far as I can understand my hon. Friend's interpretation of this Clause, it is correct.

10.30 p.m.

Mr. Millan: May I put a point briefly to the Financial Secretary? This is not necessarily just a question of including the words as they are at the moment, or excluding references to contract altogether. There is really a compromise solution whereby contracts are excluded, but only as regards expenditure under these contracts up to a certain date. In this provision it might be reasonable, in connection with the purchase of a car, if we were to say that a contract entered into before 17th April was excluded provided that the expenditure was made within six months after 17th April. It does not have to be an absolute prohibition.
I take the point that there may be questions of breach of contract and unfairness between one firm and another, but it is possible to get a compromise whereby there is a reference to contract but it is not a complete let-out regardless of when the expenditure takes place, even supposing that it may be over a continuing period of years. I know that this is a very real practical problem, and it seemed to me that the Government were being generous when they used a similar wording to this on the question of investment allowances. Some sort of compromise ought to be considered.

Mr. Mitchison: I do not wish to take up the time of the Committee arguing this matter on the merits, particularly in view of the courtesy—a somewhat unpromising courtesy, but, nevertheless, courtesy—with which the Financial Secretary received what I had to say.
I want to say two things to the hon. Gentleman. I think that there are distinctions between this case and the case of investment allowances, and the other case that he mentioned, dependent partly, but not entirely, on the reasons for the provisions in each case.
The second thing I want to say is that when we reach a later stage of the Bill we shall put on the Notice Paper the Amendment which was put down a little late on this occasion, and we shall do so in the hope that we may be able to discuss the matter at that stage if we are fortunate enough to have it selected, after the right hon. and learned Gentleman has had time to consider what my hon. Friends have said on the matter.

Mr. Ronald Bell: I originally put the point about the company to my hon. Friend interrogatively and he told me that what I had suggested was so. I ask him to request the Chancellor to consider this point before Report, which is the last occasion on a Money Bill when a change can be made. It seems to be monstrously unjust that Rolls-Royce should not be allowed to use its own motor cars and charge full depreciation for them. It is almost equally so in the case of subsidiaries. Any company which manufactures motor cars costing more than £2,000 should not be forced to discontinue to use its own cars unless it is willing to incur this very severe penalty.

Mr. H. Lever: I want to make one or two comments which perhaps the Financial Secretary will bear in mind when he is giving cool consideration to the question of contract.
The first point I want to make follows on what the hon. Member for Buckinghamshire, South (Mr. Ronald Bell) has said. It seems somewhat extraordinary that a company should be penalised financially—I am not talking about trading expenses—if it uses its own products to drive its directors about. It is extraordinary that a Conservative Government should bring in legislation of this character. Hon. Members opposite ought to consider whether the price they have to pay for these more reactionary aspects of the Budget is worth paying when it involves such an infringement of ordinary common sense and principle.
Hon. Members ought to be pondering seriously whether this price in terms of demagogy is worth paying. It does not concern my hon. Friends, because we welcome any such sign on the part of the Government. I do not approve of anomalous, piecemeal and unprincipled legislation, even though it has a squalid popular appeal. It is easy to pick on a small number of people who, for one reason or another, excite envy and feelings of inferiority, even in the breasts of chairmen of local Conservative associations, and teach this small group not to drive Rolls-Royces. I am sure that that goes down very well in local Conservative associations.
We do not worry about it unduly in the Labour Party. I have been a member of the Labour Party since I was a schoolboy. In the various blueprints for the new Jerusalem which we hope to usher in I have never seen any suggestion by any of my colleagues that the elimination of Rolls-Royces from our roads is a necessary prerequisite to the inauguration of a Socialist Utopia. Perhaps it has been taken for granted.

Mr. Ronald Bell: The hon. Member has arrived in the debate rather too late.

Mr. Lever: I did not expect that my hon. Friends, in their very fair-minded co-operative attitude, would have advanced so far by this time of the evening. Had I so supposed, I should have been here earlier to make my views a little plainer.
There is one little matter which I cannot resist bringing to the attention of the Financial Secretary. Normally, I should be sympathetic to the plea that, where a firm has contracted to buy, a car, justice requires that it should not be penalised by a Finance Bill which will come into operation after the date of the contract. That would normally have a very strong appeal. The Clause is a denial of justice and principle. It does not purport or pretend to operate on any principle of equity. The whole point of the Clause is that it lays down, in a rough and ready way, that, if a company spends more than £2,000 on a car, it shall not be allowed the capital allowance. There is no pretence that this is justice. The fact is that a company cannot charge against its profits the depreciation on a car costing more than £2,000.
However, a company can charge against its profits the most luxurious office accommodation—walnut panelling, cocktail cabinets, etc. The Government make no attempt to lay down any principle.

Mr. Millan: On a matter of pure fact, capital allowances are not given for office accommodation.

Mr. Lever: My hon. Friend the Member for Glasgow, Craigton (Mr. Millan) is assisting the Minister to confuse the issue. The commonsense issue is this. What expenditure can a firm incur which

reduces the tax on its profits? It does not matter whether it reduces the firm's tax liability by means of capital allowances or by means of an expense allowance. It amounts to the same thing. In the end, it comes to this. Under this provision a firm can no longer charge against its trading profits the depreciation upon a car costing more than £2,000, whereas it can charge against its trading profits the most luxurious office accommodation.
If a firm wants to have what is now called prestige office accommodation, it can spend liberally to achieve it. Any sort of rent can be paid for it, to provide a satisfactory outlook over the park and suitable prestige for the directors or the firm. The Inland Revenue suffers, because tax is relieved to that extent. There is no principle behind the Clause. There is no pretence of justice. The Government have singled out a particular form of expense to deny chargeability against profits.
There is a case for it. The case is one of rough justice, which always means injustice in its application. There is no logic behind it. The Government cannot pretend that they are saying that it is reasonable to have a car costing up to £2,000 and charge its depreciation against trading profits. They do not say anything of the kind. If a firm buys a Jaguar, or any other make of car, for £2,000 when it does not need it for the purpose of its trade, it can charge the whole of that sum to depreciation and get the initial allowance on it. This is so whether the car is needed for the business or not. All that may be needed for the business is a moped or scooter, but the firm has no difficulty about charging the depreciation on the whole £2,000 against trading profits.
On the other hand, even where a firm really needs a car costing more than £2,000, even where common sense and ordinary necessity dictate the use of a car costing more than £2,000—as, for example, with the Rolls-Royce Company itself—it is not allowed to charge that for purposes of depreciation. I am quite willing to yield if anyone thinks that I have misstated the position.
The Government say to the Rolls-Royce Company, as was pointed out by the hon. Member for Buckinghamshire, South, "If you use your own cars for


driving your directors about you will be penalised in the amount allowed for depreciation purposes," reasonable though it must be for the Rolls-Royce Company not to use any other kind of cars but its own for driving about its directors. There is no pretence of reason or justice.
What the Minister says makes sense if the Clause itself were based on reason, logic and justice. In that case he would be right in saying, "I am going to show meticulous care. I will not make it retrospective, because it would be unfair to the few who have contracted for a Rolls-Royce car." But one cannot say that of a Clause which says, "This will be unfair to everyone who possesses a Rolls-Royce." This is finicky when the whole Clause has no logical justification and makes no pretence that it is doing justice between one kind of expenditure and another. Why go through the elaborate charade that one is afraid to penalise through retrospective effect those who contracted to buy a car before the terms of the Bill were known? It needs an elaborate verbal quibble to justify such nicety of conduct.
I think that the Minister owes it to us that, having swallowed the whale, he ought publicly now to swallow the gnat. He ought not to strain at this little matter of the contract. I hope that he will listen to what my hon. Friend said. There is no justification at all for leaving in this piece about the contract having regard to the nature of the Clause itself.

Sir E. Boyle: I seem to remember someone suggesting recently that a suitable motto for the hon. Member for Bosworth (Mr. Wyatt) would be simper pedem pono—"I always put my foot in it." Listening to the hon. Member for Manchester, Cheetham (Mr. H. Lever), I do not know what the Latin is for "better late than never." However, I congratulate the hon. Gentleman on his contributions to the last four Clauses.
For the reasons I explained, and for the reasons which I gave to the hon. Member for Glasgow, Craigton (Mr. Millan), the Government could not possibly accept the Amendment put down by the hon. Member for Craigton and the hon. Member for Gloucester (Mr. Diamond) to Clause 23, page 18,

line 32, as it stood. I can, however, give the Committee an undertaking that I will consider carefully the suggestion made by the hon. Member for Craigton this evening. I think that it is a point well worth consideration before the next stage of the Bill.
In answer to my hon. Friend the Member for Buckinghamshire, South (Mr. Ronald Bell), I can only repeat what I said to the Committee before. Anyone—the firm itself, a subsidiary or someone outside—is in exactly the same position with regard to the provisions of the Clauses which we have been discussing. I will consider the points made by my hon. Friend, but I think it would be difficult to make any change without altering the whole purport of these proposals. Though I will consider what my hon. Friend has said, I would leave the Committee in no doubt as to what is the purport of the Clauses as they now stand.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 24.—(PROVISIONS AS TO ASSESSMENT UNDER SCHEDULE E.)

Motion made, and Question proposed, That the Clause stand part of the Bill.

10.45 p.m.

Sir Eric Errington: May I ask whether my hon. Friend the Financial Secretary to the Treasury can give me some information about this Clause? I think that it bears reference—I am not quite certain—to a case that I have forwarded to him which dealt with the situation that arose where two people received a bonus emolument after the end of the year.
One of them was assessed by means of P.A.Y.E. while the other was assessed in the normal way. The result was that the one who was assessed under the P.A.Y.E. scheme was able to get the benefit of the additional amount on which he was assessed in his Income Tax. Meanwhile, the other person, who was assessed in the normal way, could not reopen the assessment.
I would like to know from the Solicitor-General whether that is a position which is cured by this Clause because the two people concerned normally received equal remuneration but as a result of this technicality one was liable for a


greater measure of tax than was the other.

Mr. Houghton: I should like to follow the hon. Gentleman the Member for Aldershot (Sir E. Errington) who, in effect, asked the Solicitor-General to tell the Committee a little more about the background to this proposal.
Is it based on deliberate tax avoidance, that is to say, the payment of remuneration covering a number of years past—years out of date for assessment—or is it, for example, something incidental to a recent decision of the courts? I think that there was some question of transfer grants in the Civil Service which were regarded for quite a long time as taxable and then a decision was taken that they were not.
I understood that, owing to the P.A.Y.E. arrangement, in a number of cases the Schedule E assessments had not been legally made and confirmed. In those cases it seemed possible for the taxpayer concerned to reopen the assessments for those years and ask for a certain tax charged on those allowances to be discharged, having regard to the decision of the court regarding the status of these allowances for Income Tax purposes.
I have only a vague idea about this, but it would be interesting to know why this Clause is in the Bill this year, for it has not been included on any previous occasions. Is there anything substantial behind it? Is there a new threat, or is it merely to tidy up something which has been discovered in the course of ordinary business?

The Solicitor-General: The Clause is designed to remove a number of minor anomalies that have become apparent in the provisions as to assessment under Schedule E.
The first of the subsections relates to the sort of situation to Which my hon. Friend the Member for Aldershot (Sir E. Errington) drew attention. Subsections (2) and (3) relate to a different matter and hang together, and subsection (4) to yet another matter.
Subsection (1), as I said, relates to the sort of situation which the hon. Member for Aldershot described. What happens is that, where tax is collected under P.A.Y.E., normally there is no

formal assessment made, although the taxpayer can at any time, within five years, demand a formal assessment of tax. If a taxpayer has been formally assessed and the assessment is regarded as settled, he cannot reopen the assessment. If, however, he has not been assessed, he can, at any time within five years, demand an assessment. Therefore, there is liable to be the anomalous position, which my hon. Friend indicated, in which there is a change in practice which follows from a decision of one of the superior courts.
The taxpayer who has not been formally assessed can then demand an assessment which will take advantage of the changed rule of practice in his favour, while somebody else in an exactly comparable position will be precluded if he has been formally assessed to tax. Subsection (1) removes that anomaly and ensures that the rule of practice shall be that which obtained at the expiration of the period of twelve months immediately following the year of assessment.
There is also a proviso against retrospection. That deals with the matter to which both hon. Members drew attention. I do not know whether the Committee would like me to deal with the remaining subsections. If not, I am well content to sit down.

Mr. Houghton: We are getting along very well. Does what the Solicitor-General has just said mean that in these cases taxpayers will be treated alike whether a formal assessment has been made, or otherwise?

The Solicitor-General: Yes. The actual provision is that where the income which was taken into account under P.A.Y.E. is assessed more than a year after the tax year to which it relates, the assessment is to be based on the practice prevailing twelve months after the end of the tax year and not according to the practice at the later date when it is assessed. So that the man who has been formally assessed and the man who has not been formally assessed are treated comparably.

Mr. Mitchison: This means, does it not, that at the end of the year there was a practice, a decision of the court shows that that practice was wrong and there is then another practice? In the circumstances which the right hon. and


learned Gentleman has indicated, both taxpayers are assessed on what has been discovered to be the wrong practice.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 25 ordered to stand part of the Bill.

Mr. Selwyn Lloyd: I beg to move,
That the Chairman do report Progress and ask leave to sit again.
We have made satisfactory progress today in spite of the amount of time we spent on the last day's business, and I think it appropriate to move this Motion.

Question put and agreed to.

Committee report Progress; to sit again Tomorrow.

Orders of the Day — VACCINATION CERTIFICATES (CHARGES)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Finlay.]

10.54 p.m.

Mr. R. W. Sorensen: I wish to raise the question of the charges that can be made by medical practitioners for certifying that they have vaccinated or inoculated a patient. The matter was brought to my attention by a constituent of mine a short time ago, and I was rather surprised that this possibility existed. In other words, although I am certain that the great majority of medical practitioners do not exercise the power, apparently there is a minority who do so exercise this opportunity to make what I can only call petty and mean charges for the small but necessary service which they render in affixing their signature to a certificate to say that they have vaccinated or inoculated their patient.
It is obviously necessary in many cases that individuals who have to go overseas should have certificates of inoculation or vaccination. That has been the case with myself and, I am sure, many Members of the House, but it does seem extraordinary that the necessity of having a certificate to show to the appropriate authorities that the person has been vaccinated or inoculated should nevertheless entitle the practitioner to charge almost any amount he pleases by way, I suppose, of a contract between himself and the patient. I have already said that this applies to only a small minority. Nevertheless it does apply, and it is exercised. That is why my constituent, in great astonishment, wrote to me and then saw me about this matter.
Apparently what happened was this. He was about to go abroad and required to be vaccinated. He went to the doctor and took with him, incidentally, his passport. When he had been vaccinated the necessary certificate was given to him with a request by the doctor that he should pay an amount of 7s. 6d. The same amount, or approximately the same amount, was also asked for for signing the passport or the application for the passport.
In the latter case one can understand that the doctor might well say, "That is beyond my province, and I must make


some small charge," although I think even that rather unwarranted as a matter of principle; but in the case of the certificate of vaccination or inoculation it seems to me quite improper, because the purpose of being vaccinated or inoculated is for the protection of the health of the patient and the people who receive him abroad.
Indeed, one wonders how far this will go. It is possible for medical practitioners to make this small charge. They may even, I presume, charge for usage or share of a surgery. I am quite aware that doctors in some circumstances have been able to charge and still do charge beyond what otherwise is paid to them for medical services, as in the case of certifying mental patients. I must confess my wife was highly amused when at one time, as one of the justices of the peace, she was called upon, as she was two or three times a week, to go along to a doctor and certify with the medical practitioner some unfortunate mental patient and he got two guineas and she received nothing at all.
However, she waived that, and one waives the fact that all of us sign innumerable forms from time to time and would not dream of asking any payment. I suppose we could do so. I suppose one could enter into a kind of arrangement whereby one's constituents, if they wanted any forms signed, would pay, say, on a scale of fees according to the importance of the forms. The idea, of course, seems perfectly ridiculous.
Therefore, I want the hon. Lady to assist if she possibly can in this matter. Indeed, I have had recently evidence of other sorts of charges which seem questionable. I have in my hand a letter from a person who recently reported on this practice of charging for a certificate of vaccination. He said that he discovered that his own son who was to join the A.T.C. went to the doctor, who briefly examined him—it took two or three minutes only—and the doctor said, "This is not under the National Health. There is a charge of 5s." My correspondent says his son had only the residue of his pocket money with him, and said, "Oh, I have only half a crown with me." The doctor replied, "That will do," and accepted the half crown.
This is an extraordinary procedure. I am not doubting that this is quite legal, but if it is, it would seem to be due to an omission, I imagine, from the Acts, and was certainly not intended by the Ministers responsible for the promotion of those Acts.

Mr. Speaker: The difficulty about this—I may not have heard enough of the hon. Member's speech—is whether it is possible to arrive at the result he desires without legislation.

Mr. Sorensen: I think it is, and I shall endeavour to show that in a moment. I shall not speak for more than a moment longer. I am aware that legislation could meet the situation, but I am proposing another way. The hon. Lady might approach the British Medical Association and ask them to intimate in some way, by circular or otherwise, that it would be highly advisable that no doctor make such charges. That would not require legislation but merely an arrangement between some such body and the Ministry.
I want more or less to leave it there, but I would ask the hon. Lady not to treat this matter as trivial. It may seem trivial, but if I were charged in this way I would most certainly feel indignant at what I could only consider an abuse. This is an abuse, if only by a small number of doctors, and it could be dealt with in the way I have suggested.

11.2 p.m.

The Parliamentary Secretary to the Ministry of Health (Miss Edith Pitt): The first point in reply to the hon. Member for Leyton (Mr. Sorensen) is that doctors are under no obligation to provide these certificates, as he is aware. The legal position is that Section 33 (2, d) of the 1946 Act, as amended by the Schedule to the 1949 Act, provides for regulations to be made.
…for the issue to patients or their personal representatives by medical practitioners providing such services as aforesaid of such certificates as may be prescribed, being certificates reasonably required by them under or for the purposes of any enactment.
The Minister has no power to prescribe certificates not required for an enactment, and I am advised that the International Sanitary Regulations,


adopted by the World Health Organisation, under which international vaccination certificates are provided as evidence of vaccination, cannot be regarded as an enactment for the purposes of the National Health Service Acts.
The present legal position with regard to these international certificates is that they may be required by persons leaving this country as evidence of vaccination against smallpox, cholera or yellow fever, on entry to another country which makes this requirement. The International Sanitary Regulations adopted by the World Health Organisation do not make this requirement compulsory for persons leaving this country. The choice therefore lies with the foreign Government. There is no statutory provision in this country to require those leaving the country to be vaccinated or inoculated or to obtain a certificate that this has been done. An amendment of the National Health Service Acts would be necessary to require doctors to provide these certificates free of charge.

Mr. Sorensen: The fact remains that if I go overseas I require certificates to say that I have been vaccinated and inoculated. I can go to my doctor for vaccination or inoculation; surely it is possible, without legislation, for the appropriate medical authority to advise the practitioners who perform these small operations to remit the certificates without charge.

Miss Pitt: The short answer is that the doctor is not required to provide this under his terms of service. Therefore, the answer to the hon. Member's point is that it is for the doctor to decide what charge, if any, he shall make. It is a private transaction.
The hon. Member thought it was not intended that this should be the case when the National Health Service Act was passed. The answer clearly must be that it was the intention, because such certificates are not required for the purpose of any enactment, and that was specifically laid down. The present position with regard to the Service is that under some 23 different enactments the Regulations now specify 13 different purposes for which certificates are prescribed for free issue.
The main purpose for which doctors are required to provide free certificates are: to substantiate claims for various

financial benefits such as National Insurance, industrial injury, family allowances, National Assistance and pensions of various types; to establish a patient's unfitness for such purposes as jury service and registration as an absent voter, fitness for analgesia in childbirth, or pregnancy for the purpose of obtaining welfare foods; or to authorise sight tests under the supplementary ophthalmic services; and there are others.
It is difficult to see grounds for Parliament placing a duty on the profession to provide free certificates which it does not see fit to require the public to obtain. If a doctor is asked to certify that these procedures have been carried out for the benefit of someone going abroad and in respect of one of his National Health Service patients he may make a charge for so doing. Whether he does so or not is entirely a matter between him and his patient. There is no evidence to show that these arrangements involve any hardship to those people who must have international certificates because they choose to go to a country which will not admit them without one, and this issue of certificates must be regarded as being for the private convenience of the patient.
The hon. Member asks how far the process goes. Under his terms of service a doctor may not make a charge to a National Health Service patient for any medical attention and treatment which he gives to him. Treatment is defined in the Regulations to include the issue of certificates for the prescribed purposes, being medical certificates reasonably required under, or for the purpose of, any enactment. A doctor is at liberty to charge for any service which he gives which is not treatment as defined.
Finally, the hon. Member put a suggestion to me and asked whether it was not possible for my right hon. Friend to come to some kind of voluntary arrangement with doctors to provide this type of certificate free, but I am clear that the answer is "No." My right hon. Friend is not required to make any provision for this kind of certificate. If he were so required, it would need power given by Parliament to impose what would be an obligation on the doctor. There is no such power


and the provision of such a certificate is a private transaction between the doctor and the patient.

Mr. Sorensen: Before the hon. Lady sits down, may I press the point that the great majority of doctors make no charge whatever and would not think of doing so? Is it not possible for the Minister not to require a doctor not to charge but to advise, or secure the co-

operation of the British Medical Association to advise, doctors not to charge in the same way as indeed most doctors do not charge?

Miss Pitt: No, Sir. This does not come within my right hon. Friend's province.

Question put and agreed to.

Adjourned accordingly at ten minutes past Eleven o'clock.